By Rae Wee and Tom Westbrook
SINGAPORE, Oct 9 (Reuters) - Indonesia's sovereign fund said it would step into the local stock market in times of stress if it made investment sense, is cautiously buying AI exposure and may not need to remit returns immediately to the government, according to top executives.
The remarks, made in separate interviews with Reuters, offer some of the most detailed insights yet into strategy and capital allocation at an entity which, on top of public investing, spans private
assets, Indonesia's state-owned enterprise portfolio and national commodity sales.
The comments may also reassure investors worried about a potential rout in Indonesia's stock market, already the world's worst performer this year, if index firm MSCI downgrades its classification when it provides an update on its review next month.
Danantara's public investment arm has put about $3 billion into foreign and domestic stocks and bonds and, depending on market conditions, plans to invest another $1 billion by year's end.
"If there is crisis in the market, and we feel that it's just based on some external sentiments that are just very temporary ... then we might step in," said Rani Piputri, head of public investment at Danantara Investment Management.
She said the fund had been an investor, in tranches, from late last year through the heavy equity selloff that followed MSCI's warning in January that it could cut Indonesia from "emerging market" to "frontier" status.
In the event of a downgrade triggering further selling next month, Piputri said stepping in was a possibility if it looked profitable.
"We might (step in). We might ... but there is a lot of due diligence we have (to do)," she said.
"We bought (earlier this year) because we saw value. The goal was not to stabilise the market. It's great when people don't like something and we see value in it, because then you're getting it at a good price. Then when they like it we can sell it to them."
DIVIDEND DISCUSSION
Launched in early 2025 and answerable directly to Indonesian President Prabowo Subianto, Danantara was mandated to manage about $900 billion of state assets across 1,000 companies and use their dividends to maximise investment returns.
Piputri, who was hired from Wall Street to run Danantara's public investments, said her fund was holding about 65% of its assets in equities, 30% in fixed income and 5% in hedge funds, with roughly a quarter of its book invested in Indonesia.
She described the fund's exposure to AI as "judicious".
"We don't think (AI) is a bubble and we don't think it's going to burst, but we just want to be cautious entering into it because we are rather late," she said.
"You already start hearing people talk about (bubbles) which is great, because that keeps the market in check. If everybody thinks AI is a good investment, then we have a problem."
In a separate interview, Pahala Mansury, managing director of global relations and communications at Danantara Investment Management's parent company, Danantara Indonesia, said the fund was expected to deliver a return 200 to 300 basis points above its cost of capital, which at a 5-year dollar bond sale in June was 5.35%.
A 120 trillion rupiah ($6.7 billion) dividend that Indonesia's previous finance minister had said Danantara would pay to the government this year may also be retained, he said.
"We are engaging in a conversation with (new Finance) Minister Suahasil," he said. "So far the indication we have is we will still be able to manage the dividend, but of course we are still going to actually wait for the final (decision)."
Danantara has no explicit role in stabilising markets, he said.
"We believe our role should ensure that whatever we do, foreign investors will not look at it as some sort of market intervention but rather a way for us to continue to contribute to the financial deepening (and) better governance."
($1 = 17,878.0000 rupiah)
(Reporting by Rae Wee and Tom Westbrook; Editing by Kevin Buckland)
