Indonesia is still attractive for foreigners

January 19, 2017, 10.02 AM  | Reporter: Dityasa H Forddanta, Wahyu Tri Rahmawati
Indonesia is still attractive for foreigners


JAKARTA. The high yield is still the main attractiveness of Indonesia for foreign investors. Despite of The Fed’s rate rise, Indonesia still offers high returns, mainly in bonds market.

Not surprisingly, many financial companies and managements, such as Goldman Sachs, suggest their clients to invest in Indonesia.

Analysts at Goldman Sachs Economic Research Danny Suwanaputri and Nupur Gupta revealed, bonds investment in Indonesia is still attractive, on the grounds that rupiah is one of the ‘aces’ among the currencies of emerging markets.

“With the real yield at 4% for 10-year bonds, higher foreign currency reserves, stable inflation rate, and the slight current account deficit, the fundamentals of Indonesia remain positive,” the two researchers wrote in their research.

Goldman predicts that rupiah will have better performance than Malaysia’s ringgit, Korea’s won, and China’s yuan in a short term period. “If S&P upgrades the rating, the capital inflow will be more massive, mainly from funds managements from Japan,” said the Goldman Sachs analysts.

Likewise, SocGen also have positive assessment about Indonesia.

The US based investment company BlackRock also stated that Indonesia is the most favorite market. “The valuation in Indonesia seems to be the most attractive with the healthy balance, inflation reduction, high interest rate, and the developing structural reform,” wrote BlackRock analyst in a research, as quoted by Bloomberg (18/1).

Meanwhile, JPMorgan has upgraded recommendation on Indonesia to ‘neutral’. At the end of 2016, this financial company downgraded recommendation on Indonesia from overweight to underweight.

But the assessments bring potential risks for Indonesia. Foreign investors control 43.35% of government bonds, while the domestic demands for bonds in Indonesia are lower compared with other Asia’s countries. “If outflow happens, the bonds will sharply decrease,” Suwanaputri and Gupta added.

Head of Research of Asjaya Indosurya Securities William Surya Wijaya said, Indonesia has bright investment prospect, thanks to the abundant natural and human resources. However, the government has to maintain political stability.

Head of Research of Bahana Securities Harry Su said the similar opinion. Harry said, during a roadshow to several Europe’s countries, some investors once gave negative assessments over political situations in Indonesia, mainly related to the Jakarta gubernatorial election. Harry believes that Indonesia would become more attractive for the investors if the government can cope with the political situations.

Indonesia has some incentives to accelerate the economy, while the inflation rate is predicted to be controlled to be fewer than 4%. In other words, BI (the Central Bank) still has chance to cut the interest rate, while the inflation rate and financial conditions remain stable.

(Muhammad Farid/Translator)

Editor: Dupla Kartini

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