One of the side-effects of Indonesia's sovereign rating upgrade is that the credit ratings of several state-controlled companies improved accordingly. Examples are electricity distributor Perusahaan Listrik Negara (PLN), energy firm Pertamina, gas distributor Perusahaan Gas Negara, and toll road developer and operator Jasa Marga.

A ratings upgrade implies that fewer risks are seen. As a result bond yields decline, thus making it less expensive to assemble funds through the bond market. For example, the government's ten-year bond yield (SUN) has gradually dropped from 8.41 percent at the end of 2013 to 6.59 percent in the first week of April 2018. Not only government bond yields, but also corporate bond yields decline as a result of the ratings upgrade. Moreover, more capital is expected to flow into Indonesia, not only into the capital markets (implying rising liquidity) but also through direct investment. For example, foreign funds in government bonds (both conventional and sharia bonds) rose from IDR 665.8 trillion (approx. USD $48.5 billion) at the end of 2016 to IDR 871.7 trillion (approx. USD $63.6 billion) on 12 April 2018.

Credit Rating Upgrades Selection of State-Controlled Companies:

Rating Outlook
Jasa Marga Baa2 Stable
Perusahaan Gas Negara (PGN) Baa2 Stable
Pertamina Baa2 Stable
Perusahaan Listrik Negara (PLN) Baa2 Stable

Source: Moody's Investors Service

Ray Tay, Vice President and Senior Credit Officer at Moody's, said the rating upgrade of Jasa Marga to Baa2 (stable) - from Baa3 (positive) - reflects Moody's expectations of strengthening government support for the company (the central government being the majority shareholder with a 70 percent stake). Meanwhile, Jasa Marga plays a key role in the development of Indonesia's toll road network, part of the government's ambitious infrastructure development program.

The ratings upgrade of Perusahaan Gas Negara (PGN) to Baa2/stable was attributed to the company's leading position in the gas distribution sector of Indonesia. The central government controls a 56.97 percent stake in PGN.

Sovereign Credit Rating Indonesia:

Rating Outlook
Standard & Poor's BBB- Stable
Fitch Ratings BBB Stable
Moody's Investors Service Baa2 Stable
Japan Credit Rating Agency BBB Stable
Rating and Investment Information, Inc BBB Stable

Various sources