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S&P upgrades Indonesia’s sovereign rating to investment grade, IDR likely to outperform in region

On Friday, S&P Global Ratings raised Indonesia’s sovereign rating to an investment grade. The rating was revised to BBB- from BB+ with a stable outlook. After the revision, Indonesia has now acquired an investment grade rating from all the three major rating agencies. The upgrade was possibly due to the waning fiscal risks emerging from realistic budgeting and reduction in subsidies, noted ANZ. Consequently, S&P is of the view that net government debt is expected to remain below 30 percent of GDP.

The rating agency also complemented Bank Indonesia’s ability to weaken financial shocks, increase exchange rate flexibility and commitment to inflation targeting. The rising dependence on market based instruments in conducting monetary policy has been seen as a considerably optimistic development, stated ANZ. Also, the current account deficit’s contraction and inflation moderation were seen as positive developments too.

The rating upgrade is expected to confirm positive sentiment towards the Indonesian rupiah and IDR bonds. The IDR is likely to be the outperformer in the region and are tactically short the 3M INR/IDR NDF, said ANZ. A rebounding external position and higher foreign exchange reserves have eased the risk of any sharp weakening.

“Portfolio flows are the wild card but we continue to expect solid demand for Indonesian bonds on the back of their reform and yield appeal”, added ANZ.

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May 26 14:30 UTC Released

USECRI Weekly Annualized*

Actual

5.1 %

Forecast

Previous

5.0 %

May 26 14:30 UTC Released

USECRI Weekly Index*

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144.1 %

Forecast

Previous

144.5 %

May 28 15:00 UTC 20802080m

SAM3 Money Supply YY*

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Forecast

Previous

0.0 %

May 28 15:00 UTC 20802080m

SAPvt Sector Loans YY*

Actual

Forecast

Previous

-0.1 %

May 29 08:00 UTC 31003100m

EZLoans to Households*

Actual

Forecast

Previous

2.4 %

May 29 08:00 UTC 31003100m

EZLoans to Non-Fin

Actual

Forecast

Previous

2.3 %

May 29 08:00 UTC 31003100m

EZMoney-M3 Annual Grwth*

Actual

Forecast

5.2 %

Previous

5.3 %

May 29 23:30 UTC 40304030m

JPAll Household Spending MM*

Actual

Forecast

1.1 %

Previous

-2 %

May 29 23:30 UTC 40304030m

JPAll Household Spding YY*

Actual

Forecast

-0.7 %

Previous

-1.3 %

May 29 23:30 UTC 40304030m

JPJobs/Applicants Ratio

Actual

Forecast

1.46 %

Previous

1.45 %

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