JAKARTA (TheInsiderStories) – Bank Indonesia (BI) made its first direct purchases of sovereign debt in primary market in this week as foreign investors fled, said the governor yesterday. He said, the central bank had bought Rp4.65 trillion (US$300 million) of government bonds.
The governor, Perry Warjiyo reported, the Bank also bought Rp1.72 trillion in Tuesday’ state sharia bond auction and on Wednesday with total amount of Rp2.93 trillion in a green shoe option. In additional auction held yesterday, finance ministry raised Rp4.02 trillion with all buyers non-competitive bidders, on top of the Rp9.98 trillion rupiah it made in Tuesday’ auction.
Earlier, finance minister Sri Mulyani Indrawati has announced, the Southeast Asian biggest economy’ budget deficit is expected to swell to Rp852.9 trillion, or 5.07 percent of total gross domestic products (GDP). And the deficit may widen slightly, by another Rp12.2 trillion, if Indonesian crude price averages $30.90 a barrel.
The ministry data showed, Indonesia’ sovereign bond market has seen some $9 billion of net capital outflows in this year, cutting the proportion of foreign ownership from 39 percent at end-2019 to 32 percent. Warjiyo said, BI had bought close to Rp170 trillion of bonds in the secondary market, raising its ownership around Rp430 trillion.
Based on BI data, foreign net inflows in state bond and stock market there was Rp1.57 trillion in the period April 13 – 20. Warjiyo believed this shows that gradually the investors trust in Indonesia has increased, especially in fixed income portfolio investments.
He continued, its driven by the yield of portfolio investment in the form of government bond showed a yield spread of 7.1 percent or 713 basis points between 10-year Indonesian state bonds with 10-year United States treasury and real yield of 4.6 percent , higher than India, Mexico and other Asian countries.
Then, the financial market volatility index before COVID-19 at the level of 18.8, at the peak, which is around the second week of March 2020 at the level of 83.2 and the latest data shows at the level of 43.8 This means that the global financial market panic has gradually subsided, he adds.
Going forward, Warjiyo optimistic, with high interest rate differences and gradually improving risk premiums and BI policy measures, the government and related authorities will increase the attractiveness of portfolio investment in Indonesia and support the stability of the Rupiah rate.
Historically the period 2011 – 2019 in Indonesia, the outflow was relatively small in a short period and was followed by a large inflow in a long period. The data shows an average outflow of Rp29.2 trillion with a duration of about 3 – 4 months and followed by an inflow of Rp229.1 trillion with a duration of about 21 months.
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