REPUBLIKA.CO.ID, ANTARA -- Head of Investment of PT BCA Sekuritas, Herdi Ranu Wibowo said more investors will choose to invest in state bonds with the increase in Bank Indonesia benchmark interest rate (BI rate).
The central bank raised the BI rate on Tuesday to 7.5 percent from 7.25 percent earlier in a bid to prevent weak rupiah from falling more value against the US dollar.
"With BI rate rising, I predict more foreign investors will enter bond market rather than stock market provided that rupiah is stable, and trade deficit would not widen," Herdi said here on Wednesday.
He said foreign investors are expected to be aggressive in buying five, ten, fifteen and twenty year-state bonds, which are more liquid than other bonds.
Based on data at the Debt Management Directorate General, by Nov. 12, 2013, foreign investors held Rp319.52 trillion worth of state bonds, up 0.31 percent from Rp318.11 trillion by the end of Oct. 2013.
Total tradeable state bonds held by investors by Nov 12, 2013 reached Rp992.05 trillion.
Herdi said high yields on state bonds especially on 10-year bonds had attracted more foreign investors to Indonesian bond market.
He said Indonesian state bonds offer the highest yields than other country's state bonds in Asia.
He said the increase in the yields on Indonesian state bonds followed the rise in the BI rate.
When the BI rate was raised, the prices of bonds dropped and the yields rose, he said.
The country trade deficit widened though slightly to US$2.6 billion in the third quarter of this year, from US$2.5 billion in the previous quarter.
However, the current account deficit narrowed to US$8.4 billion or 3.8 percent of the country's GDP from US$9.9 billion or 4.4 percent of the GDP in the previous quarter.
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