Despite local political protests, BlackRock reaffirms its positive outlook on Indonesia's long-term government bonds
BlackRock reaffirms its positive outlook on Indonesia's long-term government bonds, believing that their high yields can withstand the risks brought by political instability. Navin Saigal, Head of Fixed Income for Asia Pacific at BlackRock, stated that they have recently increased their holdings in bonds with maturities of 10 to 15 years, shifting their investment strategy from short-term bonds to long-term bonds. Despite the protests in Indonesia, BlackRock believes that having sufficient risk premiums and a diversified investment strategy is crucial. The current real yield on Indonesian bonds is approximately 3%
According to the Zhitong Finance APP, BlackRock, the world's largest asset management company, remains optimistic about Indonesia's long-term government bonds, stating that these high-yield bonds can provide sufficient risk compensation in the face of local political instability. Navin Saigal, head of the Asia-Pacific fixed income division at BlackRock, indicated that they have recently increased their holdings of such bonds maturing in 10 to 15 years, shifting their investment strategy from shorter-term bonds to these long-term bonds. This adjustment is due to the relatively mild reaction of longer-term bonds to the unexpected interest rate cuts by the Indonesian central bank and the dovish remarks from the Federal Reserve last month.
Saigal stated, "Recent news has not prompted us to change our investment strategy in Indonesia. While I do believe the current situation requires close monitoring, it further confirms the view that having sufficient risk premium or margin of safety in investments is crucial, and a diversified investment strategy is also essential."
BlackRock's recent recommendation for Indonesian bonds came after the country's stock and bond markets faced renewed sell-offs. Previously, the country had seen a new wave of protests due to public dissatisfaction with rising living costs and inequality. Currently, Thailand is also facing political turmoil, prompting many investors to reassess the economic outlook for Southeast Asia and the benefits of further monetary easing by local central banks.
At that time, protesters targeted the residences of Indonesia's finance minister and several lawmakers. On Sunday, Indonesian President Prabowo announced that the parliament would cancel the high allowances for lawmakers, which had been a major source of discontent among many protesters.
Despite recent market volatility, Saigal stated that the "real yield" on Indonesian bonds is about 3%, "which is a fairly decent safe yield."
