The last time the Indonesian rupiah was this weak in 1998, governments across Asia were seeking international bailouts to pay off foreign creditors. Now money managers are again asking whether borrowers are overextended.
Offshore corporate debt surged to a record $128.8 billion in the third quarter of last year, about 22 percent more than the nation’s foreign currency reserves, Bank Indonesia data show. Companies weren’t deterred by the rupiah’s slump to its lowest level since the Asian financial crisis 17 years ago.
“I would be far more comfortable holding local currency-denominated debt than the U.S.-denominated debt in Indonesia, and I’d rather hold sovereign debt than corporate,” Goetz Eggelhoefer, managing partner of Asia discretionary investment at New York-based emerging market specialist TRG Management LP, said in a Jan. 14 e-mail. “Years of super-low U.S. rates have encouraged corporates to issue U.S. dollar paper, and the hunt for yield has encouraged global investors to buy it with too little regard for the underlying credit risk.”
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