Indonesian Banking..

[OxfordWill]

Im being offered a 28% interest account in Rupiah, paid out annually, anytime withdrawls without penalties. What calculations need to be made with regards to inflation, predicted XC rate, tax etc to work out if my dollars and or/pounds would be worth investing in Rupiahs? Sorry if this should be in another forum..

[cclub75]

Im being offered a 28% interest account in Rupiah, paid out annually, anytime withdrawls without penalties. What calculations need to be made with regards to inflation, predicted XC rate, tax etc to work out if my dollars and or/pounds would be worth investing in Rupiahs? Sorry if this should be in another forum..

???

-I've checked HSBC and BII, interest rates for 1 year time deposit is like 6% pa

-Inflation was 10 % y-o-y in may

-in june, the central bank raised its rates at 8.50 %, and raised its inflation forecast for 2008 at 13 %

So, okay, there is clearly an upward trend (like everywhere)... But if someone propose you now 28 % pa... I mean it's a scam. Or he's really desesperate for liquidities...

Edited June 21, 2008 by cclub75

[britmaveric]

Indeed a scam, don't do it!

[Chang_paarp]

WARNING, WARNING

Danger Will Robinson.

High interest equals high risk. Add to that Indonesia is a Muslim country. In the strict interpretation of the Koran charging interest is against their beliefs. You run a significant risk of loosing the lot.

[bendix]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

[Tomkagai]

Im being offered a 28% interest account in Rupiah, paid out annually, anytime withdrawls without penalties. What calculations need to be made with regards to inflation, predicted XC rate, tax etc to work out if my dollars and or/pounds would be worth investing in Rupiahs? Sorry if this should be in another forum..

A collegue of mine who is Indonesian, is moving all his money out of Indonesia to Singapore as his feeling is the Rupiah, banking system and ecomomy in Indonesia may in fact crash due to high/subsidised oil prices and high food prices...

Personally think you would be taking one h*ll of a risk putting any money into Indonesia..

[Edonista]

Im being offered a 28% interest account in Rupiah, paid out annually, anytime withdrawls without penalties. What calculations need to be made with regards to inflation, predicted XC rate, tax etc to work out if my dollars and or/pounds would be worth investing in Rupiahs? Sorry if this should be in another forum..

Currently a 10 years Indonesia Gov bond yields about 14% (and you have to deduct 20% tax ) , so a rate of 28% smells quite fishy. Could you anyway quote who made you such an offer ?

[Edonista]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

Another post showing your deep ignorance about almost everything. Indonesia is one of the few Asian countries paying a positive real interest rate.

[OxfordWill]

Actually it is from an insurance company that is a household name in the west. The only reason I dont want to say who is because a relative who works for them made the offer and I am not sure if I am "supposed" to be able to access the product. I will ask him and if he says its ok, I will PM anyone who wants to know. I have several Indonesian friends already going for it. But of course, they have rupiah to start with. My colleague has a similar rate from a Sri Lankan bank and has made good returns. Im just wondering what the best formula is to consider inflation vs. interest rate. Am confident its not a scam but am thinking it can only be on offer because prudential expect something bad to happen or know something about future policy I do not. Or who knows. Or maybe with the right calculation we can see, taking into consideration inflation, the true interest is more lik actual return of less than 10%. This is the info I am hoping someone can share.

Edited June 24, 2008 by OxfordWill

[OxfordWill]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

weak analogy.

[Khonwan]

Actually it is from an insurance company that is a household name in the west. The only reason I dont want to say who is because a relative who works for them made the offer and I am not sure if I am "supposed" to be able to access the product. I will ask him and if he says its ok, I will PM anyone who wants to know. I have several Indonesian friends already going for it. But of course, they have rupiah to start with. My colleague has a similar rate from a Sri Lankan bank and has made good returns. Im just wondering what the best formula is to consider inflation vs. interest rate. Am confident its not a scam but am thinking it can only be on offer because prudential expect something bad to happen or know something about future policy I do not. Or who knows. Or maybe with the right calculation we can see, taking into consideration inflation, the true interest is more lik actual return of less than 10%. This is the info I am hoping someone can share.

The cat seems to be out of the bag!

[bendix]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

Another post showing your deep ignorance about almost everything. Indonesia is one of the few Asian countries paying a positive real interest rate.

Sigh . . I'm sure you're right. I was making a tongue in cheek statement to point out the risks, but never mind.

Positive real interest rate? Yes, perhaps, if you take the official CPI rates as gospel which in a bongobongo republic like Indonesia, I'd be reluctant to do. But, hey, if it works for you, go for it. And just for the record, the Economist forecasts official CPI figures for 2008 to be 9% (again, with the error on the conservative side) with average bank deposit rates of 7.8%. But I'll defer to your greater knowledge.

It's interesting the OP has now 'revealed' the background to the 28%. When regular banks are paying 8-9%, it doesnt take a genius to work out that any finance house (even a reputed famous one from the West) offering 28% is fraught with risks. How exactly is the finance house generating those kinds of returns in a safe way?

Edited June 25, 2008 by bendix

[photojourn]

Half informed comment.

Indonesia is NOT a Muslim country. It might have the largest Mulsim population in the world but it is not, such as Malaysia, a Muslim country. In Malaysia there are separate Muslim banks that do not pay interest.

Having lived in Indonesia for a considerable number of years and run businesses there, I find comments that the banking system are about to collapse are alarmist and unfounded.

However, wherever someone offfers a return on investment that appears to good to be true, it usually is. The OP should be cautious. The mere fact that a relative offered this "super rate" should have no bearing on the situation.

Indoneisa though does have clearly defined rules for moving money into and out of the country.

WARNING, WARNING

Danger Will Robinson.

High interest equals high risk. Add to that Indonesia is a Muslim country. In the strict interpretation of the Koran charging interest is against their beliefs. You run a significant risk of loosing the lot.

[london]

Photojourn is 100% correct.

The banking system there is NOT chaotic.

It IS the largest economy in South East Asia......a fact that many don't seem to realise.

It is growing at a steady rate and the government is trying to come to terms with the corruption issues that have plagued the country for decades.

However, getting back to your OP, IF you HONESTLY believe that you can get 28% pa "from a an insurance company that is a household name in the west", the easiest way to check it is to actually contact them...even an off-shore branch and ASK THEM !

Frankly, I would not be bothered making the call. I'd be quite happy with 8-9%....and be able to sleep at night.

The old saying: if something seems to good to be true..it probably is !

[Edonista]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

Another post showing your deep ignorance about almost everything. Indonesia is one of the few Asian countries paying a positive real interest rate.

Sigh . . I'm sure you're right. I was making a tongue in cheek statement to point out the risks, but never mind.

Positive real interest rate? Yes, perhaps, if you take the official CPI rates as gospel which in a bongobongo republic like Indonesia, I'd be reluctant to do. But, hey, if it works for you, go for it. And just for the record, the Economist forecasts official CPI figures for 2008 to be 9% (again, with the error on the conservative side) with average bank deposit rates of 7.8%.

But I'll defer to your greater knowledge.

You have better to.

If you just bothered to read my previous post you would have learnt that the 10 years gov bond pays almost 14% , and that is above current inflation, even after taxes.

Short term bank deposits yield less than inflation almost everywhere, and cannot be used as benchmark for computing real interest rates.

[bendix]

Oh dear oh dear oh dear.

Being rather economical with the truth, aren't you Edonista?

Those 10 year 14% bonds were issued in 1999 and are maturing next year. The yield today, so close to maturity, is obviously much less if they're bought on the secondary market. But let's not let the truth get in the way of a good argument, shall we?

And let's pass over the fact that those bonds were develop specifically to recapitalise the Indonesian banking sector after the meltdown in 97 and 98.

Now, shall we turn our attention to more recent and reliable data (dated February 2008)?

http://bespokeinvest.typepad.com/bespoke/2...al-10-year.html

Or this:

http://www.antara.co.id/en/arc/2008/3/5/in...treasury-bonds/

But why listen to me when you can get the information on coupon rates of most recent Indobond sales from Bloomberg?

http://www.bloomberg.com/apps/news?pid=206...id=aCbJ5smLjNnU

(By the way, the firm I work for managed the placement of those bonds, the Indo government's largest ever tranche).

Edited June 26, 2008 by bendix

[AnnyLing]

Let us be precise and use IDR Government Yields of yesterday.

Series Due Date Rates

VR0031 25 July 2020 8.1465

VR0030 25 December 2019 8.3368

VR0029 25 August 2019 8.3849

VR0028 25 August 2018 8.3849

VR0027 25 July 2018 8.1465

VR0026 25 January 2018 8.1465

VR0025 25 September 2017 8.3368

VR0024 25 February 2017 8.3849

VR0023 25 October 2016 8.1465

VR0022 25 March 2016 8.3368

VR0021 25 November 2015 8.3849

VR0020 25 April 2015 8.1465

VR0019 25 December 2014 8.3368

FR0020 15 December 2013 14.2750

FR0019 15 June 2013 14.2500

FR0023 15 December 2012 11.0000

VR0018 25 October 2012 8.1465

FR0018 15 July 2012 13.1750

FR0022 15 September 2011 12.0000

FR0016 15 August 2011 13.4500

VR0017 25 June 2011 8.3368

FR0015 15 February 2011 13.4000

FR0017 15 January 2011 13.1500

FR0021 15 December 2010 14.5000

FR0014 15 November 2010 15.5750

FR0024 15 October 2010 12.0000

FR0013 15 September 2010 15.4250

FR0012 15 May 2010 12.6250

FR0011 15 May 2010 13.5500

FR0010 15 March 2010 13.1500

VR0016 25 July 2009 8.1465

FR0002 15 June 2009 14.0000

VR0015 25 December 2008 8.3368

[Edonista]

Oh dear oh dear oh dear.

Being rather economical with the truth, aren't you Edonista?

Those 10 year 14% bonds were issued in 1999 and are maturing next year. The yield today, so close to maturity, is obviously much less if they're bought on the secondary market. But let's not let the truth get in the way of a good argument, shall we?

And let's pass over the fact that those bonds were develop specifically to recapitalise the Indonesian banking sector after the meltdown in 97 and 98.

Now, shall we turn our attention to more recent and reliable data (dated February 2008)?

http://bespokeinvest.typepad.com/bespoke/2...al-10-year.html

Or this:

http://www.antara.co.id/en/arc/2008/3/5/in...treasury-bonds/

But why listen to me when you can get the information on coupon rates of most recent Indobond sales from Bloomberg?

http://www.bloomberg.com/apps/news?pid=206...id=aCbJ5smLjNnU

(By the way, the firm I work for managed the placement of those bonds, the Indo government's largest ever tranche).

Each new post from you makes more a fool of yourself.

Who has ever spoken of 14% coupon ? I spoke of 14% yield to maturity.

The current (not the one issued 10 years ago) 10 years bond is IDG000005901 expires 14.07.2017 and has a 10% coupon. Market price is 83.60 for a yield to maturity of 13.24%. You can check here http://datacenter.treasury.erstebank.com/w...ex.html?LANG=en

about your links:

the first is old. There has been a slump in Indonesia bond market since past February

the second is old too, and refers to 7 years bonds

the third is appropriate, and in fact it states:

Indonesia's rupiah bonds rose. The yield on the 9 percent note due September 2018 declined 55 basis points, the biggest fluctuation of any government debt market today, to 12.895 percent, according to the Inter Dealer Market Association in Jakarta. The price gained 2.5233, or 25,233 rupiah per 1 million rupiah face amount, to 78.1625.

Yet you failed to notice that 9% is the coupon while yield to maturity is quoted at 12.895%.

How can possibly exist a firm that pays such an ignorant and contemptuous clown like you is probably the biggest mistery of all South East Asia.

[Edonista]

Let us be precise and use IDR Government Yields of yesterday.

Series Due Date Rates

VR0031 25 July 2020 8.1465

VR0030 25 December 2019 8.3368

VR0029 25 August 2019 8.3849

VR0028 25 August 2018 8.3849

VR0027 25 July 2018 8.1465

VR0026 25 January 2018 8.1465

VR0025 25 September 2017 8.3368

VR0024 25 February 2017 8.3849

VR0023 25 October 2016 8.1465

VR0022 25 March 2016 8.3368

VR0021 25 November 2015 8.3849

VR0020 25 April 2015 8.1465

VR0019 25 December 2014 8.3368

FR0020 15 December 2013 14.2750

FR0019 15 June 2013 14.2500

FR0023 15 December 2012 11.0000

VR0018 25 October 2012 8.1465

FR0018 15 July 2012 13.1750

FR0022 15 September 2011 12.0000

FR0016 15 August 2011 13.4500

VR0017 25 June 2011 8.3368

FR0015 15 February 2011 13.4000

FR0017 15 January 2011 13.1500

FR0021 15 December 2010 14.5000

FR0014 15 November 2010 15.5750

FR0024 15 October 2010 12.0000

FR0013 15 September 2010 15.4250

FR0012 15 May 2010 12.6250

FR0011 15 May 2010 13.5500

FR0010 15 March 2010 13.1500

VR0016 25 July 2009 8.1465

FR0002 15 June 2009 14.0000

VR0015 25 December 2008 8.3368

Again this is just a list of expiry dates and coupons. The yields to maturity are dictated by market prices and of course change everyday.

A first glance info can be viewed at this link http://asianbondsonline.adb.org/regional/regional.php

[OxfordWill]

The cat seems to be out of the bag!

haha.. god damnit how stupid. Well, go and check for yourselves

[Naam]

Let us be precise and use IDR Government Yields of yesterday.

Series Due Date Rates

VR0031 25 July 2020 8.1465

VR0030 25 December 2019 8.3368

Again this is just a list of expiry dates and coupons. The yields to maturity are dictated by market prices and of course change everyday.

A first glance info can be viewed at this link http://asianbondsonline.adb.org/regional/regional.php

Edonista is right. full stop.

[Shah Jahan]

I dont know about anything else

but I do know for a fact that ALL the wealthy (wealthy meaning able to afford plane ticket and exit tax) Indonesians I know keep their money in Singapore.

That should tell you something...........

[Misty]

Why not try Zimbabwe? You can get over 1000% a year or more. Of course, you're dealing with the trifling issue of 136,000% annual inflation but don't let that deter you.

But you do get a chance to be a billionaire: Zimbabwe's new Z$100 billion bank notes:

http://www.cnn.com/2008/WORLD/africa/07/19...tion=cnn_latest

(apologies in straying off topic...)

[LivinLOS]

So all listing of bonds and maturities aside.. Anyone can say what bank really gives 28% annually in IDR ??

[Naam]

So all listing of bonds and maturities aside.. Anyone can say what bank really gives 28% annually in IDR ??

no bank in Indonesia pays 28%. if their was a renowned bank paying that kind of interest i'd have an account in Jakarta as i am interested since several years to invest in IDR. presently fixed deposits 3-12 months are 10-12% (depending on the amount) less 20% withholding tax for non-residents.

[Edonista]

I dont know about anything else

but I do know for a fact that ALL the wealthy (wealthy meaning able to afford plane ticket and exit tax) Indonesians I know keep their money in Singapore.

That should tell you something...........

That in Singapore you do not pay 20% tax on coupons and capital gain you pay in Indonesia

[mikethevigoman]

If you beleive that then this is possible also !

[Naam]

I dont know about anything else

but I do know for a fact that ALL the wealthy (wealthy meaning able to afford plane ticket and exit tax) Indonesians I know keep their money in Singapore.

That should tell you something...........

That in Singapore you do not pay 20% tax on coupons and capital gain you pay in Indonesia

unfortunately you do pay 20% indonesian tax at source if you hold indonesian bonds denominated in IDR.

[Edonista]

I dont know about anything else

but I do know for a fact that ALL the wealthy (wealthy meaning able to afford plane ticket and exit tax) Indonesians I know keep their money in Singapore.

That should tell you something...........

That in Singapore you do not pay 20% tax on coupons and capital gain you pay in Indonesia

unfortunately you do pay 20% indonesian tax at source if you hold indonesian bonds denominated in IDR.

Of course if you buy a domestic indonesian bond you have to pay taxes regardless of the bank you are using.

You could however buy IDR bonds issued by non indonesian , like this one KFW 7.50% 17.07.2012 XS0309528122 quoting 90.74. Unfortunately, it yields like a Indonesian Gov Bond net of tax.

Anyway, for an Indonesian investor wishing to buy foreign bonds, I think he would have to pay the 20% tax if he buys them through an Indonesian branch, while he pays nothing if he moves his money to Singapore and invests from there.

I think this is the reason all wealthy Indonesians move some of their dosh to Singapore.

[Naam]

Of course if you buy a domestic indonesian bond you have to pay taxes regardless of the bank you are using.

You could however buy IDR bonds issued by non indonesian , like this one KFW 7.50% 17.07.2012 XS0309528122 quoting 90.74. Unfortunately, it yields like a Indonesian Gov Bond net of tax.

i think it must be even lower due to KFW's AAA rating, but i'm not sure. in 2005, when IDR was down, i looked frantically for IDR bonds but couldn't find any offshore.