Foreign investor confidence grows stronger amid spiking inflation
Data released by Bank Indonesia shows that foreign participation in local financial markets through Bank Indonesia Certificate (SBI) in June increased more than two times to Rp33.6 trillion from Rp16.6 trillion in May.
Deutsche Bank in a report says that the number shows “improved confidence in the macro outlook” despite the concern on high inflation.
Analysts believe that Bank Indonesia’s decision to renew its key interest rate by 25 basis points to 8.75% early this month would help lessen the impact of inflation. Indonesian inflation hit 11.03% in June or the highest in almost two years. However, analysts also say that should the Central Bank decide to increase its rate, it must be done carefully as to not shock businesses.
Foreign investors also showing increased confidence through state bonds. As reported by The Ministry of Finance, foreign investment in state bonds rose from Rp89 trillion ($9.67 billion) in May to a new peak at Rp96 trillion at present or 18.45% of the total amount of state bonds. According to Debt Management Director General Rahmat Waluyanto, this figure is the highest in the past year.
The government also earned Rp6.45 trillion in auction of state bonds on Tuesday in which foreign investors accounted for 60% of the total bidding of Rp11.79 trillion. Waluyanto said the auction was supported by positive sentiment with strengthening rupiah and controlled public expectation. He noted domination by foreign investors in bonds offered by the government began after the US subprime mortgage crisis.
Bank Indonesia Governor Boediono said the economy has rebounded from the impact of a hike in subsidized fuel prices despite rising interest rates and high inflation.
"I have reported to the president that our economy has begun improving. At the beginning the effect of the fuel price rise gave our economy a slight fever, but we have overcome this," said Boediono.
He said after a meeting with President Susilo Bambang Yudhoyono that foreign exchange reserves were at a healthy $59.6 billion and inflation had "become normal again" following a jump from the fuel hike.
Consumer prices likely peaked last month and would start easing by the end of the year.
Boediono has said he expects inflation to range between 11.5 and 12.5% by year's end, before easing off to between 6.5 and 7.5% by the end of 2009. Inflation was running at 11.03% in June. The Finance Ministry said the economy would likely grow 6.19% in 2008.
The financial sector, however, is not reflecting the global economic slowdown. Credits provided by financing companies reached Rp118.36 trillion ($12.6 billion) in May or an increase of 22.75% from a year before, Asia Pulse reported.
Consumer financing accounted for 63.29% with leasing financing for 33.74%, the newspaper Investor Daily said quoting data from Bank Indonesia.
Based on the data, credits in consumer financing totalled Rp74.92 trillion or an increase of 21.39% in a year, and leasing credit grew 25.49% to Rp31.82 trillion.
Seeing the figures, the prospects are still encouraging for leasing business with higher annual growth rate, chairman of the Association of Financing Firms Wiwie Kurnia said.
Kurnia noted that business in consumer financing has expanded mainly in the automotive sector with strong growth recorded in the sales of cars and motorcycles with most owners using credit to purchase their cars or motorcycles.
Fallout from the power shortage affecting most of the country remains a cause for concern. Several foreign companies, including a Japanese consortium, have expressed their concern directly to President Yudhoyono saying if the power shortage is not corrected soon they may move their operations from Indonesia. Analysts say the power crisis may threaten close to $1 billion in future contracts.
The government recently passed regulations forcing Industries to work at least two weekends per month in order to lessen burden on the power supply during the week. The greater Jakarta area where a large number of industries are located is currently in the middle of several weeks or rotating blackouts.
Deutsche Bank in a report says that the number shows “improved confidence in the macro outlook” despite the concern on high inflation.
Analysts believe that Bank Indonesia’s decision to renew its key interest rate by 25 basis points to 8.75% early this month would help lessen the impact of inflation. Indonesian inflation hit 11.03% in June or the highest in almost two years. However, analysts also say that should the Central Bank decide to increase its rate, it must be done carefully as to not shock businesses.
Foreign investors also showing increased confidence through state bonds. As reported by The Ministry of Finance, foreign investment in state bonds rose from Rp89 trillion ($9.67 billion) in May to a new peak at Rp96 trillion at present or 18.45% of the total amount of state bonds. According to Debt Management Director General Rahmat Waluyanto, this figure is the highest in the past year.
The government also earned Rp6.45 trillion in auction of state bonds on Tuesday in which foreign investors accounted for 60% of the total bidding of Rp11.79 trillion. Waluyanto said the auction was supported by positive sentiment with strengthening rupiah and controlled public expectation. He noted domination by foreign investors in bonds offered by the government began after the US subprime mortgage crisis.
Bank Indonesia Governor Boediono said the economy has rebounded from the impact of a hike in subsidized fuel prices despite rising interest rates and high inflation.
"I have reported to the president that our economy has begun improving. At the beginning the effect of the fuel price rise gave our economy a slight fever, but we have overcome this," said Boediono.
He said after a meeting with President Susilo Bambang Yudhoyono that foreign exchange reserves were at a healthy $59.6 billion and inflation had "become normal again" following a jump from the fuel hike.
Consumer prices likely peaked last month and would start easing by the end of the year.
Boediono has said he expects inflation to range between 11.5 and 12.5% by year's end, before easing off to between 6.5 and 7.5% by the end of 2009. Inflation was running at 11.03% in June. The Finance Ministry said the economy would likely grow 6.19% in 2008.
The financial sector, however, is not reflecting the global economic slowdown. Credits provided by financing companies reached Rp118.36 trillion ($12.6 billion) in May or an increase of 22.75% from a year before, Asia Pulse reported.
Consumer financing accounted for 63.29% with leasing financing for 33.74%, the newspaper Investor Daily said quoting data from Bank Indonesia.
Based on the data, credits in consumer financing totalled Rp74.92 trillion or an increase of 21.39% in a year, and leasing credit grew 25.49% to Rp31.82 trillion.
Seeing the figures, the prospects are still encouraging for leasing business with higher annual growth rate, chairman of the Association of Financing Firms Wiwie Kurnia said.
Kurnia noted that business in consumer financing has expanded mainly in the automotive sector with strong growth recorded in the sales of cars and motorcycles with most owners using credit to purchase their cars or motorcycles.
Fallout from the power shortage affecting most of the country remains a cause for concern. Several foreign companies, including a Japanese consortium, have expressed their concern directly to President Yudhoyono saying if the power shortage is not corrected soon they may move their operations from Indonesia. Analysts say the power crisis may threaten close to $1 billion in future contracts.
The government recently passed regulations forcing Industries to work at least two weekends per month in order to lessen burden on the power supply during the week. The greater Jakarta area where a large number of industries are located is currently in the middle of several weeks or rotating blackouts.