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Indonesia, the New Safe Haven?

Farah Fitriani Faruq
Farah Fitriani Faruq
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Indonesia, the New Safe Haven?
Just when it seemed that no market was safe from global events, Jakarta’s composite index managed to close at a gravity-defying all-time high on Friday. While most of the world’s markets are in the grip of uncertainty amid tepid US economic recovery, a looming US debt crisis and eurozone jitters, the Jakarta stock exchange continued its inexorable ascent, closing up 0.6 per cent at 4,023.202. Not bad performance, but is it sustainable? Take a look at the rosy picture: Analysts in Indonesia seem to think so. Destry Damayanti, the head of research at Mandiri Securities firm told beyondbrics that Indonesia’s market is insulated from global economic woes. “What make us immune from all the troubles in the world is we have a strong economic fundamentals, a consistent policy and good valuation, ” Damayanti said. Damayanti indicated that much of the money coming into the stock exchange is from foreign investors. According to statistics from the Bank Indonesia, the country’s central bank, the country is expected to see an estimated $11 billion in capital inflows into the portfolio market this year. This figure is slightly lower than last year’s total of $15.7bn last year. So far this year the IDX has seen foreign outflows of $802m, as investors withdrew from riskier growth market investments. The IDX fell 8 per cent in the first 38 days of the year, only to climb 17 per cent since that low point. Foreign direct investment, on the other hand, is expected to be higher this year than last, with an expected $16.7bn in 2011, as compared to $13bn in 2010. “All the negative headlines from Europe and US, it even makes our market become a safe place for investment,” Damayanti said. Edwin Sinaga, the president of brokerage PT Financorporindo NusaOverall, told beyondbrics that investors still see Indonesia as one of the most attractive markets in the region. “Indonesia as one of the best growth [markets] in Asia, and the economic stability in Asia makes the region more attractive compared to other markets especially Europe and US,” Sinaga said. He said that based on sentiment the index could stay around the 4,000 level for a couple weeks ago. “We predict that level will be sustained for the next 1-2 months and the index will reach to 4,300 at the end of the year,” Sinaga said. The big question on everyone’s minds is of course can it continue and for how long. A rebound of developed economies, a fall in commodities prices or unforeseen political turbulence could send yet Jakarta into a tailspin. News Source: beyondbrics Image Source: photographynice
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