The perception of the risk of investing in Indonesia is getting better. It looks from the decrease in credit default swap (CDS) Indonesia tenor of five years and ten years. In fact, the CDS had touched the lowest record down all the time.
Five-year tenor of CDS on Wednesday (27/12) are at the lowest point of 86.59. If compared to the position late last year or year to date (ytd), CDS decreased 45.16%.
While the tenor of CDS 10 years touched the lowest level per December 22, valued at 154.00. Although its score rising to 155.05 on Wednesday (27/12), CDS are already down 31.20% since the beginning of 2017.
The decline in Indonesia's CDS give an indication of the risk of defaulted Indonesia bonds is becoming increasingly lower. Anil Kumar, Fixed Income Fund Manager Ashmore Asset Management Indonesia saw a decrease in Indonesia due to the CDS response from Indonesia's debt rating increase by Fitch Ratings from BBB-to BBB. Fitch also gave a Stable outlook. It will make foreign investors returned to hunt Indonesia bonds, because it is considered to have a low potential risk.
The Philippines is a contender because it has similar to Indonesia's debt rating. Debt ratings earned Philippines is B2 from Moody's Investors Service or one rank above investment grade with outlook Stable and BBB- from Fitch Ratings that equal the minimum investment grade with a Positive outlook.
CDS tenor of five years the Philippines yesterday was at 59.33. "Indonesia will begin pursuing slowly, especially if the economy of the quarter IV-2017 improves, then we can approach the CDS of the Philippines," said Anil, Wednesday (27/12).
Optimism is also supported by more stable commodity prices, maintained inflation, as well as the decision of Bank Indonesia that continue to maintain interest rates at low levels. No wonder Anil predict Indonesia's CDS semester I-2018 can approach the Philippines at level 60 's.
Ahmad Mikail, Economist Samuel Securities Indonesia, said when the two other international rating agencies, namely Moody's and S&P, also raised the rating of Indonesia, then Indonesia's CDS could become lower again. He estimates, Indonesia five-year tenor of CDS in 2018 can reach level 50-60 and 10-year tenor around 106-110.
The optimism is based on Indonesia's economic growth projections are better than other countries with the same rating. "Indonesia's economic growth is still higher at 5.1% compared to other countries that have a rating of BBB from Fitch and median at 3.2%," explains Ahmad.
But there is a risk of internal, in the form of depreciation of the rupiah and the pressure in years of politics. But investors are not too worried because Indonesia's economic fundamentals are strong and able to withstand the effects of the political turmoil inside and outside the country, including the effects of interest rates rising by The Fed next year. Ahmad said the market had already priced-in and anticipated. As a result, the rupiah could be stable in the range of Rp 13,650 in 2018.
