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Rupiah to benefit further from elections, economic growth
The rupiah, already among Asia’s best currency performers, may continue to gain against the US dollar due to the largely peaceful recent legislative and presidential elections and as Indonesia's economic prospects continue to weather the storms of the global downturn
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The rupiah, already among Asia’s best currency performers, may continue to gain against the US dollar due to the largely peaceful recent legislative and presidential elections and as Indonesia's economic prospects continue to weather the storms of the global downturn.
The local currency has gained by 9 percent so far this year and will likely to strengthen more in the second half of the year, with President Susilo Bambang Yudhoyono’s projected victory helping to ensure the sustainability of development programs necessary to boost growth in already Asia’s third-fastest growing economy, say analysts.
“During the elections, there were no riots or conflicts as in Iran or some other countries, which is positive for the market,” currency analyst Farial Anwar said Friday, adding it should bolster investors' confidence in the country’s economy.
The rupiah closed 10,173 Friday against the US dollar.
The country’s economy grew by 4.4 percent in the first quarter from a year earlier, with full-year growth estimated to be over 4 percent.
While it is slower than the 6.1 percent growth booked last year, it is still better than most of its regional peers amid the current global slowdown, trailing only behind China and India.
By comparison, Malaysia, Singapore and Thailand each contracted by at least 6 percent.
Bloomberg, quoting DBS Asset Management, said Indonesia’s rupiah and bonds, offer one of the region’s few “pockets of opportunity” for fixed-income investors in the second half of the year.
“Among currencies, I’m only bullish on the rupiah due to the high yield, the positive political outcome and its economic growth,” Desmond Soon, who helps oversee some US$24 billion of assets as a portfolio manager at DBS Asset in Singapore, told Bloomberg in an interview.
An HSBC index tracking the nation’s local-currency debt is up 13 percent and the yield on the benchmark 10-year bonds has dropped 1.38 percentage points to 10.51 percent. That’s still the best yield on offer in Asia’s 10 biggest economies excluding Japan.
Benchmarks tracking currencies and government bonds in the region posted their biggest quarterly gains since 2004 in the three months through June as signs that a global recession was easing bolstered demand for emerging-market assets.
However, despite the positive outlook, Farial said the local currency would not advance to a level far below 10,000, in part because the authority would need to create a balance between the interest of importers and that of exporters.
“So the movement of the local currency will be somewhat limited, not too far away from Rp 10,000.”
The Jakarta stock index meanwhile declined Friday to close at 2,062.92, although long-term
outlook remains also positive in accordance with improving overall economy, stock analyst Felix Sindhunata said.
