Jakarta. Indonesia's benchmark stock index broke a record on Friday (19/05), closing at an all-time high after global credit rating agency Standard & Poor's raised the country's long-term sovereign bonds to investment grade, applauding the government's efforts to reduce fiscal risks.
The Jakarta Composite Index closed 2.59 percent higher at 5,791.88. The previous record high was set on April 26, 2017 when it hit 5,726.53.
"It shows that we have strong fundamentals in the economy," said Kiswoyo Adi Joe, an analyst at Recapital Securities.
New York-headquartered ratings agency raised Indonesia's long-term sovereign credit rating to BBB-, the lowest investment grade level, from BB+. S&P was the last of three major global rating agencies to grant investment grade status to Indonesia.
Fitch Rating and Moody's Investor Services already lifted Indonesia's sovereign debt rating to investment grade in 2011 and 2012, respectively.
However, Kiswoyo said there is a possibility that foreign investors already knew about the plan to raise Indonesia's investment grade before S&P's official announcement.
"Maybe that is why foreign investors conducted a net sell today," Kiswoyo said.
Foreign investors, who made up 37 percent of Friday's trading, sold Rp 101.1 billion ($7.59 million) more in shares than they bought, while local investors bought Rp 101 billion more than they sold.
Still, foreign investors posted a total net buy of Rp 28 trillion since January as the JCI gained 9.35 percent so far this year.
Gundy Cahyadi, an economist at DBS in Singapore, said S&P's upgrade is "perhaps a little overdue, but it is certainly a clear indication of Indonesia's improved fundamentals in recent years and investors' acknowledgement of it."
He said DBS had expected this upgrade as per its January research note.
"The investment grade can boost foreign investors' confidence to invest in Indonesia while some of them are taking a conservative move towards the Japanese market," said Lanjar Nafi, an equity technical analyst at Reliance Sekuritas Indonesia.
All indexes increased during Friday's trading on the country's benchmark stock market. This was led by a 3.54 percent gain in the index that tracks 59 stocks related to infrastructure, utilities and transportation.
The index that tracks 89 stocks in the financial sector, including Bank Central Asia, Bank Mandiri and Bank Negara Indonesia, gained 3.45 percent.
Gainers beat decliners by 230 to 90 on Friday.