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More foreign money coming to Indonesia’s bond market after $8.5b inflow
As of Monday, foreign investors had bought a total of Rp 118.9 trillion (US$8.48 billion) of government bonds since the beginning of the year. The number was equal to about 46 percent of all government bond sales during the period.
Change Size
There are more than 850 Indonesian issuers (or guarantors) which have issued global bonds as of Aug. 31, 2019. (Courtesy of Freepik)
I
ndonesia is expected to see more capital inflows in the bond market until the end of this year as yield-seeking investors are turning to the country during times of economic slowdown and low interest rates around the world, analysts say.
As of Monday, foreign investors had bought a total of Rp 118.9 trillion (US$8.48 billion) of government bonds since the beginning of the year. The number was equal to about 46 percent of all government bond sales during the period.
Mandiri Sekuritas fixed-income analyst Handy Yunianto said on Monday that the foreign investors’ rising appetite in the Indonesian bond market was not necessarily caused by tightening liquidity, but rather by slowing global growth.
He explained that last year the United States Federal Reserve’s decision to hike its interest rate by 100 basis points (bps) throughout the year caused foreign investors to flee out of the countries with wide current account deficits (CAD) as if their currencies were weakening against the dollar. However, the issue this year was different.
The trade war between the US and China was causing global growth to slow down, he said. “As a result, investors went on to look for countries with better growth and we [Indonesia] are one of them,” said Handy during a press briefing in Jakarta.
Despite recording slower economic growth of 5.05 percent in the second quarter of this year, he said the number was still higher than other countries because the country was primarily driven by its domestic economy. Its involvement in the global supply chain was also low, making Indonesia fairly resistant to the impacts of the trade war.
However, Bank Mandiri chief economist Andry Asmoro warned that the possible slowdown that loomed over the US’ and China’s economies could also hamper Indonesia’s growth, given that the two countries were the archipelago’s biggest trading partners.
