(Feb 9): Global investors swarmed into Indonesian debt just before the market turned against them.
Foreign funds snapped up a net US$304 million of Indonesian government bonds on Thursday, the most since August, according to government data released over the weekend.
But the influx of funds came just before Moody’s Ratings cut Indonesia’s rating outlook to negative on concerns of policy uncertainty and weakening governance under Indonesian President Prabowo Subianto’s administration. It added to market jitters after MSCI Inc warned it might downgrade the nation’s stocks to Frontier status due to a lack of transparency and market liquidity.
The yield on Indonesia’s benchmark 10-year debt rose to the highest level since August on Monday (Feb 9), after jumping the most in more than a year on Friday. A gauge tracking Indonesian bond returns for dollar-based investors has slid 1.4% this year, making it among the worst performers in emerging markets.
“The risk perception on Indonesian investment assets slightly increased,” Myrdal Gunarto, an analyst at Malayan Banking Bhd, wrote in a note to clients. While the debt will be negatively impacted, the drop may be limited given the low proportion of the country’s government bonds that are owned by foreigners, as well as Bank Indonesia’s bias to intervene in the secondary market, he wrote.
See also: Singapore’s GIC, Temasek revamping dealings with hedge funds — Bloomberg
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