Southeast Asia’s biggest economy’s 14% returns pips South Asian giants by 3%. FMTNews
SINGAPORE: Indonesia and India, often looped together because of a welter of economic similarities, face a potentially divergent outlook in 2020 thanks in part to contrasting scope for monetary and fiscal policy stimulus.
While India’s central bank has pulled its benchmark interest rate down to the lowest level since the aftermath of the global financial crisis, Indonesia’s has yet to fully reverse its monetary tightening of 2018. With a yield premium of about 50 basis points on 10-year local-currency notes, a slightly stronger investment-grade rating, and a more welcoming regulatory structure for foreign inflows, Indonesia has several advantages.
Indonesian bonds already pipped India for 2019, with 14% returns for Southeast Asia’s biggest economy compared with 11% for the South Asian giant as of Dec 23.With a government debt-to-gross domestic product ratio at less than half of India’s near-70%, and a smaller deficit, Indonesia has fiscal firepower to boost economic growth without triggering immediate financing concerns.
The cap could be boosted to at least 10% of outstanding stock, from the current 6%, one local report has suggested.
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