Mallika Sachdeva notes, lower global bond yields, 8% carry in Indonesia, large positive real rates, and scope for duration gains, should continue to attract bond flows. Over the coming months, a potential rating upgrade by S&P, and the passing of the tax amnesty law should also be favorable for flows. A pickup in growth, political stability, and recharged policymaking could also attract flows into FDI and equities.
Indo Bond Auction Color yesterday: Demand in the auction by both foreign and local accounts were consistently strong (IDR24.6tn). As expected, MoF upsized and issued IDR 16.3tn, in which they issued a long tail in the 20y FR72. Yields in the long dates hence sold off and were capped by auction flippers, which led curve to finally close 2-4bps higher in the 6-30y tenors. Meanwhile, short dated papers rallied and continued to be well sought in expectation of a policy rate / reserve requirement cut, and also as implied yields in the onshore and offshore swaps continued to be low. MoF has now achieved around 25% of their 2016 gross financing target.
Stock implications? DB portfolio pick to lower rate: ASII, CTRA, BSDE, and BBTN