State investors from Malaysia and Singapore said they are committed to investing in neighbouring Indonesia for the long term after index provider MSCI’s threat to downgrade the Southeast Asian nation sparked a selloff in the Jakarta stock market.
Rohit Sipahimalani, chief investment officer of Singapore state investor Temasek Holdings, said investors have to take a long-term view.
“If you start reacting to everything from a short-term perspective, you are going to get whipsawed,” he said during a fireside chat at an investment conference in Jakarta on February 5.
Malaysia’s Khazanah Nasional is “patient capital”, according to Hisham Hamdan, chief investment officer of the sovereign wealth fund.
“Some of these [market] movements are just noises,” he said during another fireside chat at the conference. “If you are an active manager tracking an index, you may have to react. But as asset owners, we have the privilege of thinking long term.”
The benchmark Jakarta Composite Index slid more than 10% in just two days after MSCI warned on January 28 that it may reduce Indonesia’s weighing in its indexes and potentially downgrade the country from an emerging to a frontier market.
The index provider said that in its consultations on the free float of Indonesian shares, investors highlighted that “fundamental investability issues persist due to ongoing opacity in shareholding structure”.
Temasek and Khazanah have investments in the finance, telecommunications and technology sectors in Indonesia.
“Our portfolio companies are actively investing in Indonesia because they can be more hands-on and ensure governance and management,” Sipahimalani said. “As long as we are comfortable with the management and governance of these companies, the ups and downs do not change the long-term opportunity.”
Hisham said that “Indonesia will remain an important country for us, and we will continue to invest there”.
