Indonesia regains investment grade after 14-year

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Indonesia regains investment grade after 14-year

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Indonesia recovers its investment grade status from Fitch Ratings, after 14 years.

16 December,2011 12:17 pm

Indonesia has recovered its investment grade status, ending a 14-year stretch of being rated as junk.The move crowns nearly 10 years of steady economic improvement in Southeast Asias largest economy, with Aberdeens Adrian Lim saying it shows the resource-rich country has managed its policies well.Its a good indication of what the country has done. Its had a good stretch when commodity prices were strong, and theyve been careful about managing their exposures and their balance sheets.Fitch lifted Indonesias rating by one notch to BBB-minus, putting it on par with India.Lim says it will make the cost of funding cheaper in local markets, but its difficult to say if Aberdeen would raise its equity exposure in Indonesia.When we pick stocks, the cost of funding is one of many things we look for, it has to be the business prospects and the people that run the business that we back, and that doesnt change substantially in our view when we look at something, a development like this one.Still economists say the move is a boost for Jakarta, by closing the gap with the BRIC nations of Brazil, Russia, India and China.The upgrade also makes the country more attractive to risk-averse investors, pulling in funds at a time when other bigger and more developed economies are getting downgraded due to heavy sovereign debt burdens.Low public debt and positive real interest rates also give the Indonesia central bank greater flexibility to combat any slow-downs.Indonesia will need another upgrade before its government bonds can be added to benchmark global indexes.Analysts say this may come from Standard and Poors, which has held a positive outlook on the countrys ratings since April.