Dec 1, 2010

Moody's reviews Indonesia rating

Moody's Investors Service has today placed on review for upgrade the Indonesian government's Ba2 foreign and local-currency bond ratings.
The main reasons for the decision are Indonesia's economic resilience is accompanied by sustained macroeconomic balance, the government's debt position and the central bank's foreign currency reserve adequacy are improving, and  the economic policy framework remains increasingly well positioned to deal with evolving macroeconomic challenges and potential shocks.
The rating review also applies to Indonesia's Ba1 country ceiling for foreign currency (FC) bonds and Ba3 ceiling for FC bank deposits.
The country ceiling for short-term FC debt is not prime and remains unaffected by this action.
These ceilings act as a cap on ratings that can be assigned to the foreign currency obligations of other entities domiciled in the country.
Moody's had placed Indonesia's Ba2 sovereign ratings on positive outlook in June 2010, after a one-notch upgrade in September 2009, on account of the country's resilience to the global financial crisis, improving government credit-metrics, and its ability to manage domestic political challenges to the reform agenda without damaging key policy institutions' credibility or effectiveness.
"We have now placed the sovereign credit ratings and country ceilings on review for possible upgrade as the economic recovery is being sustained alongside well managed external accounts and reasonably good inflation fundamentals," said Aninda Mitra, a Vice-President at Moody's and its lead sovereign analyst for Indonesia.
"Moreover, the recent improvement in Bank Indonesia's foreign currency reserve position coupled with continuing reduction in the government's debt burden are reducing risk perceptions and encouraging greater inflows of foreign direct investment and long-term capital," he added.
"Additionally, amidst growing inflows of foreign portfolio investment, monetary stability alongside ongoing policy flexibility are enabling Indonesian authorities' to gradually deepen money markets and heighten financial absorption capabilities," said Mitra.

Disclosure: No position at the stock mentioned above.

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