Indonesia keeps stacking its chips (By IFN)

(See IFN) INDONESIA: The country continues to ride high on its return to investment grade status following a second upgrade to its credit rating in the span of one month; this time by Moody’s.

Investment flows have already been picking up even before it received its first upgrade by Fitch in December last year; with foreign direct investment (FDI) hitting a record of US$19.3 billion in 2011, also the highest in Southeast Asia. Its FDI is also expected to rise another 25% this year.

Two out of three nods from the world’s leading rating agencies – S&P has yet to raise its rating, currently the highest level below investment grade – is certain to open up room for further investment inflows; and the Sukuk mart is expected to be among the sectors with the most to benefit.

“The interesting area for Indonesia here is Sukuk. For some Middle East buyers who could not invest earlier because it was not investment grade, this is a new thing for them, which is good," Guan Ong, the principal at Blue Rice Investment Management, a hedge fund that specializes in fixed income, was quoted as saying.

Indonesia’s stacked chips also could not have come at a better time, with the global economy looking the way it is. Furthermore, Moody’s has also noted that high-yield corporate bond issuances in Asia will remain “highly uncertain” in the next few months as “credit markets stay choppy” on concerns over European sovereigns and China’s corporate governance issues keeping investors cautious.

“Caution and uncertainty look to be the by-words for at least the early part of 2012; and while Asian corporates may make preparations for the reopening of the high yield bond markets, it will likely take a higher speculative-grade rated, existing issuer to break the deadlock and open the floodgates for smaller and first-time names to the market,” said Laura Acres, a vice-president and senior credit officer at Moody’s.

For Asia this year, what better name is there than Indonesia to set credit flowing?