Jacintha Poh, Assistant Vice President at Moody’s and author of the report titled "Property Indonesia: Rupiah's Slide to 17-Year Low Is Credit Negative for Developers”, said that, despite 80 percent of Indonesian property developers’ total hedged US dollar bond principal was left unprotected by option facilities, their healthy liquidity levels (supported by strong cash positions and solid cash flows) should offset the negative impact of prolonged rupiah weakness over the 12 months ahead. Moreover, most of this US-denominated debt constitutes long-term debt.

So far this year, the rupiah has depreciated about 13.6 percent against the US dollar. It currently hovers near a 17-year low as a result of monetary tightening in the USA, weak commodity prices, and recent turmoil in China. Between late May 2013 (when former Federal Reserve Chairman Ben Bernanke started to hint at the winding down of the US quantitative easing program) and the start of September 2015 Indonesia’s currency has depreciated by a staggering 45 percent against the US dollar.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

Moody’s conducted a sensitivity test involving five Indonesian property developers to measure their resilience in case the rupiah would touch IDR 15,500 per US dollar. These five property developers were Pakuwon Jati, Bumi Serpong Damai, Alam Sutera Realty, Lippo Karawaci, and Modernland Realty.

Earlier, Moody’s had praised the Indonesian government because the latter had decided to cut taxes in nine pioneer industries (in an effort to boost the nation's economic growth). New companies that come to Indonesia with an investment of at least IDR 1 trillion (approx. USD $71 million) in one of these nine pioneer industries can request a tax cut of between 10 percent and 100 percent for a period up to 20 years. Moody’s said this tax cut is credit positive (for Indonesia’s sovereign credit rating) as these tax holidays are expected to result in more foreign and domestic direct investment (triggering employment and income growth) and creates a more diverse economy as it involves development of nine pioneer industries (including marine transportation, energy and telecommunications). By increasing the value of foreign direct investment (FDI) Indonesia will become less susceptible to shifts in global financial market sentiments. Moody’s currently rates Indonesia’s sovereign credit as Baa3/stable (investment grade).