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Indonesia eases debt mark-to-market rules for long-term investors

[JAKARTA] Indonesia relaxed on Friday mark-to-market rules for debt securities held by insurance companies and pension funds, a move some analysts said could help boost investor demand for local debt.

The Indonesia Financial Services Authority, the country's financial regulator, said insurance firms can now amortise the purchase value of their debt securities until the debt matures. Previously the firms had to record the market value, which may have fallen significantly amid a global rout, in their books.

They can also adjust the minimum amount of their risk-based capital to keep a certain level of solvency, the regulator said in a press statement.

"Some insurance firms and pension funds might be more willing to buy Indonesian debt after previously being worried about having to mark to market," said Ariawan, a fixed income analyst at Sucorinvest Central Gani. "But at the end of the day it depends on the financial capabilities of the individual firms."

Investors have pulled money out of Indonesian markets over the past few weeks due to concerns about the domestic economy, which grew at its weakest pace in six years, and the prospects of a rate hike by the US Federal Reserve.

The latest rules apply to insurance firms and pension funds that have been "directly affected by the global financial condition that has led to a decrease in the market value of investments and levels of solvency", the regulator said.

But the policy is temporary and will be revoked when the global financial condition recovers, it added.

"It's suitable for this period when debt securities offer high returns that are suitable for long-term investors such as pension funds and life insurance firms," said Herbie Mohede, senior fixed income portfolio manager at Samuel Aset Manajemen.

REUTERS