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View all search resultsIn stressed global bond market, RI investors look inward for cues
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Motorists commute during rush hour on Aug. 29, 2023, in Jakarta. (AFP/Bay Ismoyo)
G
rowing concern about debt levels in developed economies could see some bond investors look to emerging market issuances as an alternative, but in Indonesia, they will want answers about the new finance minister and the burden-sharing scheme with Bank Indonesia (BI).
Permata Bank chief economist Josua Pardede told The Jakarta Post on Friday that, “all in all”, investors view Indonesia’s bonds to be competitive with those of India, its traditional rival in the region, given the declining yield trend and attractive real yield.
“However, the direction of fiscal policy under the new finance minister is a key factor that might bring positive results, if the budget is managed with discipline, but can be negative when it is considered to be weakening governance,” said Josua.
One of the country’s longest-serving finance ministers, Sri Mulyani Indrawati, perceived as a symbol of fiscal prudence and reassurance for investors, was replaced last week.
President Prabowo Subianto on Monday installed Purbaya Yudhi Sadewa as the new finance chief, and, within days, the new minister introduced a groundbreaking policy of shifting Rp 200 trillion (US$12.1 billion) of government deposits held in BI to commercial banks in a bid to spur lending and, ultimately, gross domestic product growth.
Investors were closely watching the fiscal impact of the maneuver, which signaled "aggressive fiscal expansion”, Josua said, noting that, if the funds actually flowed into the productive sector, investors would have a positive view on the policy, and therefore on Indonesian government bonds as well.
“If it’s perceived to be weakening fiscal discipline and only becomes a ‘support’ for corporations, the bonds' risk premium may go up. Politically, the transition to Purbaya brings a new perception: more pro-growth, but investors want proof that fiscal discipline will be maintained,” said Josua.
