The Standard and Poor’s rating agency (S & P) considers the Indonesian bond market to remain the preferred investment destination for global investment managers. General elections (elections) that take place safely and proactive economic policies are a positive sentiment for the bond market.
Director of Sovereign & International Public Finance Ratings, S & P Global Ratings, Kim Eng Tan said Indonesia’s economic growth in recent years was better than the growth rate of countries in the world. In the projection released in November 2018, S & P predicts Indonesia’s economic growth will reach 5.3% this year and 5.5% by 2020.
Tan said that the Indonesian government and the corporation were heavily issuing bonds and most were absorbed by foreign investors. According to Ministry of Finance data, foreign investor ownership in state securities (SBN) until May 15, 2019 reached Rp. 955.5 trillion or 38.61%. The portion of foreign investor ownership in the market of government bonds in local currency is the third highest in the world after Japan 46% and China 41%.
“Of course there is a plus and minus side. Indonesia is one of Indonesia’s foreign fund manager’s bond investment destinations, this is also positive for Indonesia’s growth,” Tan said in Indonesia in 2019: Coping With a Post-election Year, in Jakarta, Thursday (16 / 5).
On the other hand, dependence on funding sources from abroad is also risky because there are external factors that cannot be controlled. For example, if there is a withdrawal of foreign funds from the markets of developing countries, the bond market will be volatile.
So far, Tan sees Indonesia as having a stable economic policy that is proactive for foreign investors. To maintain investor confidence, the government must strive to maintain economic growth to meet targeted targets. Stability in the financial sector must also be maintained.
Tan assessed that the political turmoil that occurred after the General Election in Indonesia was still reasonable and would not have an impact on economic growth. “Democracy in Indonesia is going well, I’m not worried about current developments,” he said.
The Consumer and Infrastructure Sector is Recommended for Investors
Meanwhile, Pefindo Director Vonny Widjaja said that the condition of the corporate bond market was relatively stable compared to last year. “This year there are not many downgrades (debt ratings), only two companies,” said Vonny. Beyond that, there are several independent multifinance companies that get negative prospects because of tightening liquidity.
Vonny said, the most stable sector now is the consumer sector, especially the food and beverage industry. The infrastructure sector is also positive along with the increasing number of infrastructure funding options from the capital market, including bonds, asset securitization, project bonds, and infrastructure investment funds (Dinfra).
Indonesia Infrastructure Finance (IIF) Managing Director & Chief Investment Officer Harold Tjiptadjaja said he was optimistic that infrastructure development would continue to run post-election. “Whoever is elected, infrastructure development will continue. What’s different is only a matter of priority,” said Harold.
He also got many questions from foreign investors who wanted to invest in Indonesia. Harold assessed that the consumer and natural resources sector is still the motor of the economy. The same goes for infrastructure which has been developing rapidly in the past four years. This year, IIF estimates that it can channel financing of Rp 3 trillion-Rp 4 trillion in various infrastructure projects. “We are not too aggressive in the political year,” he said.