Central banks take orthodox measures to pull foreign investors during the pandemic. FMTNews BNM Investment
KUALA LUMPUR: When it comes to what kind of central bank policy is best for luring foreign investors to Asia during the Covid-19 pandemic, orthodoxy is winning hands down.The proportion of Indonesia’s debt held by foreigners has dropped to 27% from 39% at the end of last year, while in Malaysia it increased to 24% from a low of 21.7% in April.
Money managers are concerned the plan will become entrenched, despite repeated assurances to the contrary from the central bank governor and finance minister. Malaysian policy makers have trimmed their benchmark by a combined 125 basis points this year, whereas Indonesia’s has only cut by 100 basis points, even though its higher nominal rate means it has relatively more headroom.One important consequence of the changing fund-flow pattern has been to sap volatility in Indonesia’s bond market.
Central bank ownership of the nation’s sovereign bonds has increased to about 20% as of Oct 12 from less than 10% at the start of the year, according to Jennifer Kusuma, a senior rates strategist at Australia & New Zealand Banking Group Ltd in Singapore.
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