UNAIR NEWS – Lecturer of Faculty of Economics and Business (FEB) Universitas Airlangga (UNAIR) Dr Rossanto Dwi Handoyo SE MSi PhD has his view about the increased interest rates in America (The Fed) followed by an increase in Indonesia (BI). In this regard, he mentioned several examples of safe investments to save the macroeconomy.

Some of them are holding foreign currency, stocks, property, gold, and bonds (debentures). On this matter, Rossanto emphasized that each investment has its pattern.

Asset games

In his opinion, it is better to avoid foreign currencies because the rupiah is depreciating by 7 to 8 percent, affecting the dollar exchange rate in the foreign exchange market. The trigger, investors are buying a lot of dollars, causing the rupiah to weaken. Likewise, with stocks, not all stocks are good, but some are negative. “If there are foreigners investing shares in Indonesia but the profit is less than 7-8 percent, it means a loss, so investors will look for other alternative assets,” explained Rossanto.

Furthermore, home properties are now sluggish because purchases don’t react quickly. Without a doubt, Rossanto assessed that the aggressive increase in interest rates also affected rising property prices.

Therefore, for now, one of the least risky assets is gold. “The safest asset is gold, the price of gold will rise and quickly be converted to money. When interest rates go up, the selling price of gold goes down, which drives people to transfer their asset ownership to gold,” he said.

Effect of bonds

Rossanto added that bonds or debentures also received a significant influence from the increase in BI interest rates, including state sharia bonds or state sukuk, which provide benefits with a profit-sharing system. In that case, an increase in the BI interest rate will result in an increase in deposit (savings) rates. It means that interest rates on loans and bonds have also risen, including the country’s yield rate. Moreover, investor confidence in issuing state bonds and sukuk is still very good.

“If you keep interest rates the same….well, it’s likely that no one will want to buy. Even though bonds in Indonesia are in the safe category, because the Indonesian government is always on time in paying off principal and interest,” said the FEB UNAIR lecturer.

Indonesian government issuing bonds are not without reason, he continued, the Indonesian government’s steps in issuing government bonds and sukuk also took into account market conditions and the need for debt funds.

“The US government’s debt is much bigger than Indonesia’s, which is 120 percent of the Gross Domestic Product (GDP). The Indonesian government still has credibility so that it can give investors confidence,” he said.

In the end, Rossanto hopes that the government has the fiscal capacity to support social safety nets. “The people are like that too, with the rising food prices, it’s best to reduce things that are consumptive in nature and start to be literate about investment,” he said.

Author: Viradyah Lulut Santosa

Editor: Khefti al Mawalia