CREDIT DEFAULT SWAP - JAKARTA. Perception of investment risk in Indonesia which is reflected through Credit Default Swaps (CDS) again experiences an upward trend. The increase in CDS occurred in line with the global stock market turmoil in recent weeks.
Quoting Bloomberg, on Friday (26/10), Indonesia's 5-year CDS rose to its highest level this year at 159.13. Throughout October, Indonesia's 5-year CDS tenor has surged 22.30% (mtd).
Indonesia's 10-year CDS also rose. Until last Thursday (10/25), Indonesia's 10-year CDS tenor had risen 7.93% (mtd) throughout October to 227.18 levels.
Fixed Income MNC Securities analyst, I Made Adi Saputra said, global stock market turmoil triggered an upward trend in Indonesia's CDS. The turmoil that occurred prompted global market players to move their funds from shares to US Treasury instruments or debt securities from other developed countries.
"This has caused the yield rate of developed countries' debt securities to be more stable," he said.
At the same time, market players avoid assets from emerging market countries that have high risk. Moreover, there are also other concerns in the form of geopolitical turmoil that has occurred in various regions of the world in recent times.
Not surprisingly, in general, CDS in emerging market countries experienced an upward trend. For example is the Philippines. CDS' 5-year tenor in the Southeast Asian country touched 97.78 last Friday which was the highest level this year.
Made added, Indonesia's internal conditions tend to be conducive lately. The rupiah exchange rate against the US dollar seems not too volatile in the past two weeks. Nevertheless, throughout October, the rupiah exchange rate in the spot market experienced a 2.10% correction against the greenback.
In addition, foreign investors began to enter the Indonesian bond market even though they were not too aggressive.
Citing data from the Ministry of Finance's Directorate General of Financing and Risk Management, from October 19 to 25, foreigners increased their ownership in Government Securities (SBN) by Rp 9.1 trillion to Rp 859.12 trillion.
The main sentiment of Indonesia's CDS increase came from abroad. This factor affects the movement of yield on Government Securities (SUN) denominated in US dollars. "Throughout this month, the average increase in yield on SUN denominated in US dollars reached 8.61%," Made said.
On the contrary, yields on rupiah-denominated SUN on the secondary market only experienced an average increase of 5.31% during this month.
Made argued, CDS Indonesia and other emerging market countries would still be in an upward trend. Because of the high level of global uncertainty will last until the end of the year, so that the perception of the risk of investment in developing countries is still relatively high.
"The trend of rising CDS is difficult to avoid at this time because external conditions are still problematic," he said. (Translator: Barratut Taqiyyah Rafie)
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