Welcome Guest   |  Login   |   Signup
JG Logo
Fri, February 10, 2012
Archive Search

Indonesian Debt Escapes Top 10 Default Risk List
Katrina Nicholas | July 03, 2009

Share This Page
1
0
0
0
Share with google+ :


Post a comment
Please login to post comment

Comments

Be the first to write your opinion!

Singapore. Indonesia’s improving economic outlook has pushed it out of the world’s 10 riskiest issuers of sovereign bonds, according to credit-default swap prices from Credit Market Analysis.

The perceived default risk on Indonesia’s debt fell 267.5 basis points last quarter to a level indicating it’s a safer investment than bonds of Argentina, Ukraine and Iceland, CMA said in a report. Those nations, along with Lithuania, Dubai, Romania, Bulgaria, Latvia, Venezuela and Kazakhstan, have the greatest probability of default among 63 governments with credit swap contracts on their debt, the report shows.

“Indonesia is enjoying something of a re-rating,” said Tim Condon of ING. “Growth has surprised on the upside and there are high hopes next week’s presidential election will deliver an outright win for the incumbent.”

High-yield sovereigns of the nation’s neighbors aren’t as “credit investor-friendly,” with the Philippines grappling with a budget deficit and Vietnam beset by a shortage of US dollar foreign exchange, Condon said.

The perceived default risk on Philippine government debt fell the least in Asia last quarter, contracting by 143 basis points.

Morgan Stanley economists drew parallels between Indonesia and India last month, saying the former now had a “strong domestic demand story” and could warrant inclusion in the so-called BRIC economies along with Brazil, Russia, India and China.

“The strengthened political foundations will accelerate the pace of policy reforms,” Morgan Stanley’s Chetan Ahya said, “which together with the ongoing structural decline in cost of capital and the natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential of 6 to 7 percent from 2011 onwards.”

Moody’s Investors Service listed the nation’s strengths as “increased political stability, the containment of budget deficits and an improving external financial position” on June 12.

The country is said to have hired banks to help sell its first sovereign Samurai bonds, or yen-denominated notes sold by foreign borrowers in Japan.

The cost of protecting Indonesian bonds from default for five years fell 330.8 basis points this year and last traded at 307.5 basis points, CMA prices on Bloomberg show. Swaps on the Philippines declined 179.7 basis points to 212.9 and contracts on Vietnam fell 188.6 basis points to 309.1.

Indonesia’s debt is rated Ba3 by Moody’s, three notches below investment grade.



Bloomberg