Indonesia faces tough bond market

Last week, Indonesia took some hits from analysts across the region. UBS and Credit Suisse First Boston cut their Indonesian rupiah forecasts, ING told investors to "steer clear" of the nation's financial assets and JPMorgan told investors to expect more near-term volatility. "Indonesia 2005 bears uncomfortably close parallels" to the Asian financial crisis of 1997 and 1998, wrote Tim Condon, a Singapore-based ING economist in a research reporter. He added: "We believe the challenges to rupiah stability posed by rising oil and a strong US dollar are more than mere short-term blips." UBS predicts the Indonesian rupiah will drop to 10,400 to the dollar within a month. However, Ashley Davies, a UBS analyst, cautions that perhaps the media is blowing some of Indonesia's woes out of proportion. After pointing out that his 10,400 rupiah prediction is just a 100 rupiah move from his last forecast, he added: "We are expecting Indonesian authorities to take credible steps towards stabilizing its currency in the coming three months. But for now, the emerging-market currency is caught in a vicious circle where declines in the currency cause further panic selling rather than opportunistic buying."