Foreigners Hold Rp 849 Trillion in Indonesian Government Bonds

Foreign investor ownership of Indonesian Government Securities (SUN) reached Rp 848.96 trillion on January 5, 2018, a Rp 218.37 trillion increase from January 5, 2017. Meanwhile, the foreign ownership portion increased to 40.3 percent of the total government debt of Rp 2,106.6 trillion. This foreign ownership also increased from the previous 37.62 percent of the total SUN of Rp 1,773.28 trillion.

The still-high yield on government debt remains attractive to foreign fund managers to park their funds in the domestic financial market. Currently, the SUN yield is still above 6 percent, which is higher than that offered by the Chinese government (4.03 percent), South Korea (2.51 percent), the Philippines (5.79 percent), Singapore (2.34 percent), Vietnam (5.25 percent), and the United States (2.48 percent). Furthermore, Indonesia has now reached investment-grade status, thus reducing perceived investment risk.

However, the potential outflow of hot money from the domestic money market needs to be watched out for, in line with the rising trend of the US Federal Reserve's benchmark interest rate (The Fed Fund rate) and the upcoming political year with simultaneous regional elections in 2018.