It's one of 17 emerging markets shortlisted from 27 by consulting group
(NEW YORK) A new report prepared for Calpers, the biggest US pension fund, has found that Indonesia now meets certain standards, making it eligible for investment.
Calpers, with US$165.8 billion under management, periodically reviews the markets that it plans to invest in using a seven-factor model defined by the Investment Committee of Calpers, the report said.
The report, which recently became available on Calpers website, was prepared by consulting group Wilshire Associates. It reviewed 27 emerging markets according to criteria such as political stability and investor protection.
While Indonesia made the list, China, Colombia, Egypt, Morocco, Pakistan, Russia and Venezuela remained with rankings below the acceptable level.
The rest of the approved list comprises Argentina, Brazil, Chile, Czech Republic, Hungary, India, Israel, Jordan, Malaysia, Mexico, Peru, the Philippines, Poland, South Africa, South Korea, Taiwan, Thailand and Turkey.
The Wilshire study is subject to a review by the Calpers board. Markets that do not meet the standards have an opportunity to argue for inclusion.
Sri Lanka fell below the acceptable threshold but is eligible to be given a one-year 'cure period' during which it has an opportunity to improve its score.
The report noted that of the 27 markets that were reviewed, Pakistan and Egypt made the biggest improvement over the past year, while India and Sri Lanka had the greatest declines. The scoring system, which has undergone some revision in its methodology from last year, uses 3.0 as the highest ranking.
The three country parameters of the study are political stability, transparency, and productive labour practices, and the market factors are liquidity and volatility, regulation, ease of access, and settlement efficiency and transaction costs.
Information released in by the Philippine government showed that the country improved its rating to 2.13 from 2.0 a year earlier. The 2.0 level has been the threshold for deciding which markets are acceptable for investment.
India scored 2 out of a maximum 3 for 2006, falling from 2.25 last year, according to the study. India and Peru were added in 2004. Pakistan scored 1.8 compared with 1.63 last year.
An announcement of Calpers's final decision is expected in April.
The list is a reference point, investor Paras Adenwala said.
'Calpers is well respected,' said Mr Adenwala, who manages the equivalent of about US$250 million of stocks as chief investment officer at ING Investment Management India in Mumbai. 'There are a lot of investors who look at Calpers for guidance.'
Overseas demand for Indian stocks helped the benchmark Sensitive index to a record as investors tapped the second-fastest pace of growth among the world's 20 biggest economies. The Mumbai stock exchange's benchmark Sensitive Index, or Sensex, has risen 4.8 per cent this year.
The Business Times Singapore,
Reuters, & Bloomberg
February 4, 2006