ASIATODAY.ID, JAKARTA – India and Indonesia are now the favorite destination countries in Asia for global investors.
Previously, India and Indonesia were included in the “Fragile Five” category from Morgan Stanley.
According to multi-asset tactical asset allocation analyst at Fidelity International in London Kitty Yang, both India and Indonesia have strong short-term and long-term fundamentals.
“The growth of both countries is supported by positive (and sustainable) reforms over the last 10 years under the leadership of Prime Minister Modi and President Jokowi,” he explained, as quoted by Bloomberg, Monday, February 12 2024.
Fund managers including Fidelity International, Robeco Group and abrdn, said the outlook for Asia’s two giants’ bonds and currencies was brightening, following successful reform programs and fiscal restraint.
Meanwhile, the first Fragile Five, which includes Turkey, South Africa and Brazil, refers to countries considered most at risk because of their dependence on foreign investment to drive growth.
Overseas investors are understood to have poured a combined $14 billion into Indian and Indonesian bonds in 2023, even as global debt markets sold off on the prospect of higher interest rates for longer periods.
The amount of funds disbursed then became the highest combined inflow to the two countries since 2019, compared with outflows in 2013 of $3.9 billion.
Indonesian Prospects
Indonesia is considered to have taken big steps in improving its finances.
Fund manager at Pacific Investment Management Co. in Hong Kong, Stephen Chang said that Indonesia has been very disciplined in keeping its fiscal deficit below the 3% threshold, except for a few years during the pandemic.
“Even with a new government, we are confident that some of these economic policies will continue,” he explained.
The Indonesian election will also take place on February 14 2024, which previously was a big risk factor for investors.
However, currently elections are seen as something that is not too worrying considering that reform is so deeply rooted.
This is despite the fact that the front-runner in the Bloomberg survey, Prabowo Subianto, campaigned on the promise of free lunches for 83 million beneficiaries, and was comfortable with increasing the country’s debt to as much as 50% of GDP.
The market is also considered worried about the potential resignation of Finance Minister Sri Mulyani Indrawati, who is considered to have stabilized government finances.
“[Sri Mulyani has made the Ministry of Finance] a better place than he found it during his tenure, and this helps the fundamental investment thesis for Indonesia,” explained Asia sovereignty strategist at Robeco Group in Singapore, Philip McNicholas.
However, he argued that there was unlikely to be any real setback in the overall ministry process.
McNicholas also believes that the prospects for Indonesia and India will remain positive.
“Both countries have good long-term economic prospects. There is still much yet to be achieved, which offers room to improve growth prospects further,” he explained. (ATN)
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