Indonesian bonds have gone from the worst to best performers in Asia this quarter as a more stable rupiah lured funds such as HSBC Global Asset Management and Pioneer Investments to Southeast Asia’s highest yields.
Local-currency notes have gained 4.1 percent since June 30 after being the only debt from the 10 major Asian emerging markets to post a negative return in the second quarter, according to an HSBC Holdings Plc index. Their average yield of 6.2 percent is the highest in Southeast Asia and compares with 5.2 percent in the Philippines and 3.5 percent in Malaysia.
The rupiah weakened 2.8 percent against the dollar in the second quarter as Indonesia posted trade deficits in each of the three months, the first shortfall since July 2010. Since then, the currency has lost just 0.8 percent and foreign funds have added 13.7 trillion rupiah ($1.4 billion) to their debt holdings, finance ministry data show. The more stable rupiah is helping to revive interest in the country’s notes, said Gordon Rodrigues, investment director at HSBC Global in Hong Kong.
“We are cautiously positive on Indonesia,” Rodrigues, who helps oversee $32 billion of Asian fixed-income assets, said in an interview on Aug. 7. “In a more stable environment for bonds, being underweight for a long period of time on Indonesia, which is a relatively high-yielding country, tends to hurt you.”
Posted by stekunan on August 13, 2012
The central bank, Bank Indonesia, will likely hold its policy rate as the economic outlook remains bright, dismissing concerns of a pickup in inflation, analysts say.
“Bank Indonesia meets on Thursday and we expect rates to remain unchanged at 5.75 percent,” said Prakriti Sofat, economist at Barclays Capital in Singapore, in a note to clients on Monday. The central bank has kept its key rate in the last five months after cutting it by 25 basis points in February to maintain growth momentum at home and defend the country’s economy from the effects of a slowdown in Europe and the United States.
Bank Indonesia said in its July 12 statement that economic turbulence in Europe and weakening exports have put pressure on the rupiah. July’s pause was also aimed to support the currency, it said. The rupiah has lost 4.5 percent against the dollar this year.
Prakriti said further monetary easing “would weigh on the rupiah,” given relatively strong economic expansion in the second quarter and already accelerating inflation. She said inflation could reach the top end of Bank Indonesia’s forecast of 3 percent to 5 percent. Inflation accelerated in July at a 4.56 percent year-on-year rate, from June’s 4.53 percent.
Posted by stekunan on August 8, 2012