"Investors will remain loyal. We believe, based on previous outflow experiences, that foreign investors will again return to Indonesia," the central bank`s executive director of monetary management, Nanang Hendarsah, said here on Friday.
He admitted there had been strong outflows of funds in the past few weeks, especially because of an increase in the yields on the US government bond, the 10-year treasury bill, that moved between 2.9 and 3.0 per cent.
He declined to say how much fund or investment portfolio had flowed out.
At present, the ten-year SUN (government bond) moved in the range of 6.9 per cent. The figure was higher than in other emerging markets, he said.
"The attractive yield will make Indonesia more alluring. The challenge is how to make investors continue to stay in Indonesia. The way to keep them is credible and consistent monetary and fiscal policies," he said.
A monetary policy that lowered inflation to the bottom end of BI`s inflation target range of 2.5 to 4.5 per cent, plus controlling budget deficit to under three per cent would boost investors` confidence, he said.
Nanang said capital outflow pressure had indeed weakened the country`s rupiah, with a 5.7 per cent volatility rate recorded until May. "BI`s intervention is only aimed at smoothing the volatility. So, there is no need to panic," he said.
BI has intensified dual intervention in the foreign exchange market and state securities.
At the Jakarta Interbank Spot Dollar Rate, the rupiah was traded at Rp13,943 against the US dollar, strengthened by 22 points from Rp13,965 the day before. Reported by Indra Arief Pribadi
(H-YH/INE)
(T.SYS/B/KR-BSR/S012)
Reporter: antara
Editor: Heru Purwanto
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