Dollar Income Fund: Prospects 2012

Euro Fixed Income Performance 2012
Stretching back fixed income mutual fund increases associated high yields of government bonds in dollars or SUN (Government Securities). Citing information from Infovesta a Fixed Income Fund Index, the growth of these types of mutual funds for 2011 of 12.32 percent. This index shows the average growth of yields on fixed income mutual funds in Indonesia. Although quite high, the yield performance of the index is still below the growth yields of securities during 2011. SUN government bond motion parameters can be observed through an index called the HSBC USD Bond Index. Index is an index averaging the price movement of bonds already issued government securities. Based on these indexes, SUN during 2011 recorded a 21.3 percent increase.

The magnitude of the yield of fixed income mutual funds is quite encouraging as these types of mutual funds into alternative investments given the demonstrated performance of equity funds that are less encouraging, especially due to the growth of the Composite Stock Price Index (CSPI) is only 3.2 percent. Analyzing the prospects for fixed-income mutual funds in 2012 could not be separated from the analysis of growth prospects for government bonds and corporate bond securities because these two instruments are the main investment instruments of fixed income mutual funds.

SUN 2011 performance as the main motor RD Fixed Income

During 2011, government bonds recorded growth SUN. The increase in 2011 is continuing a successful increase in 2009 and 2010 respectively up 21.1 percent and 22.4 percent.

In contrast to the rise in government bond securities in 2009 and 2010 that was driven by purchases of foreign investors. Foreign investors bought government bonds amounting to Rp 20 trillion in securities in 2009 and Rp trillion in 2010. In 2011, foreign investors continue to record net purchases (net buy) SUN government bonds amounting to Rp 27 trillion, but the number is still below the net buy conducted by the BI (Bank Indonesia) amounting to Rp 43 trillion. Therefore, the BI to be the most active institutions become buyers SUN in 2011. In 2011, banks and mutual funds are recorded as the biggest selling record of government securities are bonds amounting to Rp 5 trillion and Rp 4 trillion. In 2011, the pension fund is also listed as the party recorded a net sales (net sell) of Rp 2 trillion.

On the other hand, the rise in government bond securities in 2011 established that the performance of Indonesian government bonds into bonds with the best performance among the major countries of Asia, namely China (5 percent), Malaysia (5 percent), Thailand (5.1 percent), Korea South (6.3 percent), Singapore (6.5 percent), and Filipinos (12.8 percent). SUN also mencatkan best performance among the major countries of Asia in terms of average growth in the last 8 years. Within these waktut, SUN government bonds has grown about 16 percent.


Positive factors driving SUN in 2012

As the underlying assets of the major fixed income mutual funds, bonds, government securities still predicted to grow positively in 2012 was. There are three factors that are expected to raise the price of securities.

The first factor driving the 2012 GS is the raising of Indonesia's debt rating by Fitch and a rating Moddy's Eligible Investments (Investment Grade Rating). The increase in these ratings have been shown to reduce the risk perception of the decline reflected Indonesia CDS (Credit Default Spread), the decline in yields on securities and increasing flow of foreign capital. In terms of reduction in CDS, a day after the announcement of an increase in ratings by Fitch on December 15, 2012, 5-year CDS went down 5 points. CDS before the rise in the overall ratings by Fitch is at position 225, but with the rise in Indonesia by Moddy's ranking on January 18, 2012, Indonesia was on the CDS 190.

Prospeks SUN in 2012 will also be sunny with a BI policy is to consider the purchase of securities in order to maintain price stability SUN. This policy is very positive impact, especially when mid-September 2011 when the government bond prices plummeted due to SUN capital outflows (outflow) is large in relation to the worsening crisis in Europe. In addition, the BI policy to buy these securities are intended to replace the monetary policy instrument of the SBI (Bank Indonesia Certificate) to SUN.


Negative sentiment in the SUN 2012

Apart from the positive sentiment for SUN to strengthen in 2012, there are factors that potentially negative sentiment for the bond market. The inflation factor is a concern, the continuing crisis in Europe and the amount of new issuance plans by the government this year.

Danger of inflation becomes a factor which is calculated by bond market participants. It mainly deals with the government's plan to impose restrictions on the consumption of subsidized fuel or rising prices of subsidized fuel. Whatever the policy taken by the government relating to the fuel will have a significant impact on the inflation rate. Based on a scenario assumptions or restrictions on price increases, inflation is predicted to rise by 5.5 percent to -6 percent. Inflation projection for this would lead to BI to lower the inflation rate to raise the BI Rate. BI Rate hike will push up yields on SUN SUN will also mean lower prices.

European crisis is yet to show a comprehensive solution also has potential as a factor pengambat SUN Government Bond prices rallied. Events in the month of September 2011 where there is a sudden reversal outflow due to the worsening crisis in Europe became an important indicator that the foreign investor is still one of the dominant party in possession of the SUN. In late July 2011, foreign ownership had touched Rp 248.87 trillion, but then at the end of September fell to Rp 218.1 trillion.

In connection with the new government bond issuance plan by the government in this DGAT (Directorate General of State Debt Management), the amount of fear it would result in the issuance of bonds flooded the market supply pushing up prices declined due to lack of demand (demand). In 2012, the government will issue new bonds with a total value of Rp 240.4 trillion. However, the total net issuance of government bonds in 2012 (net of government bonds that will mature) amounting to Rp 134.6 trillion. The new bonds to cover the 2012 budget deficit of 1.5 percent of GDP or Rp 124 trillion. This concern refers to the excess supply demand survey 2012 Bonds by the Ministry of Finance where total demand is Rp 84.5 trillion. This means that there are considerable differences between supply and demand of the government bonds which can cause bond prices to fall.

Corporate Bonds as an alternative to obtain a high yield for the Fixed Income Fund

Given the government bond yields are already low enough, investors to invest in fixed income mutual funds are feared to decline in 2012. For information, government bond securities that became the benchmark 10-year yields just 5.3 percent or 5.03 percent after taxes. Meanwhile, government bond securities tenure of 5 years, 15 years and 20 years respectively yielding 4.65 percent, 8 percent and 6.25 percent so that the net return after tax is 4.42 percent, 5.5 percent and 5.94 percent. The low yield is one of them can be handled by increasing the allocation to corporate bonds.

Corporate bond yields are still quite attractive. Corporate bonds with AAA ratings still provide the difference in yield (yield spread) by 273 basis points (bps). Corporate bond yield spread is widening quite significant in October. At the end of September yield spread is still in the range of 229 bps. While that for corporate bonds with lower ratings provide a very attractive yield spread. Position by the end of January 2012, rating of A + is able to provide 406 bps yield spread rating of A-and still give 505 bps yield spread. This means that for Corporate Bonds with a tenor of 5 years which is rated A + capable of yielding about 8.48 percent while the Corporate Bond with the same tenor but with a rating of A-capable of yielding 9.7 percent.

Therefore, in general, the outlook for rupiah income mutual funds is quite good in 2012 was given the potential for attractive returns for investors. The yield is derived from a potentially stronger bond prices and bond SUN corporation that still provide attractive interest rates. SUN still has the potential to strengthen the bonds given the rise in Indonesia's debt rating to Investment Grade Rating from Fitch and Moddy's and related to the BI policy to purchase securities as a monetary policy instrument. On the other hand, fears of weakening prices of government bonds due to inflation SUN reduced because the main purchasers of foreign securities investors who are not exposed to the risk of inflation in Indonesia. In addition concerns the weakening bond prices due to oversupply of government securities will also be reduced because the BI policy that will keep buying securities as a monetary instrument replacement SBI.