Sun, 01 Aug 2010


By Anthony Deutsch
The stream of upbeat economic news out of Indonesia continues with figures showing the country is on track to meet ambitious investment targets this year.

Data released by the investment coordination board Wednesday showed a 40 jump in realised domestic and foreign investment in the first six months of the year to $10.3bn. By the end of June, the country had already reached 58 per cent of its 2010 target. Investment chief Gita Wirjawan said the data was a “very promising” sign of faith in the country’s financial fundamentals.

Indonesia’s solid economic prospects are attracting billions in domestic and outside investment, but the largest growth was seen in transportation, telecomunications and storage, which made up around 10 of all new foreign capital. Wirjawan said he expects direct foreign investment to grow 22 percent over the whole of 2010.

The latest data, which excludes the banking and oil sectors, comes on top of a string of recent upgrades on Indonesian debt that has helped lift buying of both stocks and bonds. Japan this month went as far as to award it’s state debt investment grade status, but its enthusiasm has not yet been matched by the big three ratings agencies Moodys, Standard and Poors and Fitch.

Investors are showing confidence that Indonesia will continue its stellar run, even though the stock market is already up around 20 per cent so far this year. The positive sentiment is driven by faith in financial reforms, solid monetary policy, political stability and economic growth of around 6 per cent.

While most banks are positive on Indonesia, some argue that the stock market is overpriced and warn of possible inflationary pressure amid rising food and energy prices. The central bank is however expected to hold off on rate hikes until next year.