Daiwa May Set Up Japanese Fund for Investment in Indonesia as Demand Rises

Daiwa SB Investments Ltd. may set up a new fund in Japan to cater to rising demand for Indonesian investments amid speculation the Southeast Asian nation will win credit rating upgrades.

“Flows from Japan to Indonesia will definitely increase,” Kenichiro Ikezawa, a Tokyo-based fund manager at Daiwa SB, which manages about $52 billion, said in an interview. “Indonesia is very popular among the Japanese because of its high yields.”

Indonesia’s 10-year local-currency bonds yield 8.19 percent, compared with 3.51 percent for similar-maturity debt in Thailand, 7.4 percent in the Philippines and 2.22 percent in Singapore, according to data compiled by Bloomberg. Yen-denominated notes in Japan yield 1.095 percent.

Overseas investors held a record 168 trillion rupiah ($18.6 billion) of Indonesian bonds as of July 16, an increase of 56 percent from the end of 2009, according to figures from the finance ministry.

Japanese fund inflows to Indonesia through investment trusts increased around 12 percent to 142.5 billion yen ($1.64 billion) in the second quarter from the previous three months, according to data from the Investment Trusts Association, Japan, posted on its website. That was the fourth-biggest amount flowing out of Japan into 10 major markets in the region after Hong Kong, Singapore and India.

Japan Credit Rating Agency last week lifted its assessment of Indonesia to investment grade. Fitch Ratings on Jan. 25 raised the country to BB+, one level below investment grade. Standard & Poor’s upgraded Indonesia in March by one level to BB, while Moody’s Investors made a similar move in September to Ba2.

HSBC Global Asset Management Japan plans to launch its Indonesian debt fund on Aug. 26, according to Bloomberg data.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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