Q+A-Indonesia to keep luring emerging market investors

By Neil Chatterjee

JAKARTA, Dec 17 (BestGrowthStock) – Indonesia’s stock market
rallied to a record high this month, while net foreign
ownership of the country’s government debt is also at a
record, as investors are attracted by strong growth and
political stability.

Here are some questions and answers on why Indonesia is a
favourite with emerging market investors.

WHY INDONESIA?

Indonesia showed resilience during the financial crisis.
Its economy should expand around 6 percent next year, slower
than China or India, but maintaining 2010’s steady growth.

The economy is being driven by exports of resources such as
palm oil and coal, for which global demand is picking up, plus
a growing base of young consumers buying cars and mobile
phones in the world’s fourth most populous nation.

Its lack of reliance on exports, in contrast to Asian peers
Malaysia and Taiwan, means investors can bet on a growth story
that will be relatively decoupled from the slow growth in
Europe and the United States.

President Susilo Bambang Yudhoyono was re-elected last
year, boosting investor confidence. While progress on his
promise to combat graft and on other institutional
investor-friendly reforms has been limited, the police have
containing the threat from militants while the government’s
debt levels have fallen.

Debt is seen at 27 percent of GDP this year compared with
about 80 percent in 2001, according to data from Bank Danamon.

That’s led to credit rating upgrades: Fitch in January
rated Indonesia one notch below the coveted investment grade,
which would put it on a par with BRIC nations and allow many
institutional investors who avoid junk bonds to invest. Many
economists and the government see investment grade in 2011.

Total returns from owning Indonesian bonds in dollar terms
have been a mouthwatering 20 percent after 40 percent returns
last year, while the stock market has climbed over 40
percent this year, after last year’s 87 percent rally. And a
strengthening rupiah , up over 4 percent, boosts local
currency assets.

WHAT ARE INVESTORS BUYING?

Investors are buying banks and consumer stocks. Top vehicle
seller