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Indonesia to remain attractive for foreign funds in 2021: Experts
Although Indonesia’s 10-year government bond yield has fallen from its highest level in March, the country still offers a competitive yield of 4.4 percent, the second highest after that of South Africa.
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(Reuters/Dado Ruvic)
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ndonesia is expected to remain lucrative for foreign funds in 2021, according to analysts, as investors are on a return hunt amid a low interest rate trend and quantitative easing measures implemented in various countries around the world.
As countries grapple to contain the COVID-19 pandemic, central banks around the world are expected to continue quantitative easing measures and maintain interest rates at a low level to spur economic activity. Such a situation is expected to bring foreign capital inflow to emerging markets, including Indonesia, Mandiri Sekuritas fixed income analyst Handy Yunianto said on Dec. 22.
“Ample liquidity and low yields will send foreign investors to seek high yield assets and Indonesia still offers that attractive yield,” he said during an online press briefing.
Although Indonesia’s 10-year government bond yield had fallen by 225 basis points from its highest level in March, the country still offered a relatively high real yield of 4.4 percent, the second highest after that of South Africa, he added.
Read also: Indonesia’s bond market remains attractive but risks loom
Overseas investors were rushing to pull out their funds from the Indonesian capital market earlier this year as they turned their heads to safe haven assets, such as the United States dollar and gold, over fears of an economic downturn. The moves resulted in spiking bond yields, crashes at the domestic stock market and a weakening rupiah exchange rate.
However, foreign funds have been slowly flowing in since the second quarter of 2020 as investors regained their confidence following easing pandemic restrictions and hopes of vaccines. Bank Indonesia (BI) records renewed inflow of Rp 48.6 trillion (US$3.4 billion) in foreign portfolios to the government securities (SBN) market between April and November.
