By Berni Moestafa

Indonesia, Asia’s second-best performing stock market last year, may be ready to join the so- called BRIC group of major emerging nations, according to Templeton Asset Management Ltd.

“Indonesia’s political and economic outlook has improved tremendously in recent years,” Templeton portfolio manager Dennis Lim wrote in a note yesterday on Chairman Mark Mobius’s blog. “So clearly, it would not look out of place beside the BRIC countries.”

Inclusion in the category — Brazil, Russia, India and China — coined in 2001 by Goldman Sachs Group Inc. Chief Economist Jim O’Neill may increase demand for Indonesian stocks. Investors should “stick with the BRICs,” a group that “tends to outperform in non-recession years,” Morgan Stanley strategists led by Jonathan Garner said last week.

The Jakarta Composite index jumped 87 percent last year as Indonesia skirted the global recession after nine interest rate cuts by the central bank. President Susilo Bambang Yudhoyono’s re-election in July boosted confidence he will maintain policies that helped Southeast Asia’s biggest economy expand more than 6 percent annually in the two years until 2008.

Economic growth may average 6.6 percent over the next five years as poverty and unemployment decline, Yudhoyono said on Jan. 4. Fitch Ratings on Jan. 25 raised Indonesia’s credit ratings to one level below investment grade.

Fitch’s Upgrade

Fitch’s rating upgrade reflects Indonesia’s economic resilience and an improving balance of payments, said Bank Indonesia Deputy Governor Hartadi Sarwono. Foreign-exchange reserves rose to $69 billion as of Jan. 22, he said.

BRIC funds are gaining in popularity.

“The BRICs theme, which played well in 2009, continues to resonate in early 2010,” Cambridge, Massachusetts-based funds tracker EPFR Global said Jan. 21. In the third week of January, “dedicated BRIC equity funds recorded inflows of $182 million, right around their weekly average year-to-date versus the $103 million they averaged last year.”

Overseas investors have bought a net 666 billion rupiah ($71 million) of the shares this year, according to exchange data. Overseas investors purchased 13.3 trillion rupiah of the shares last year, down from 18.7 trillion rupiah in 2008.

–Editor: Reinie Booysen, Linus Chua

To contact the reporter on this story: Berni Moestafa in Jakarta at +62-21-2355-3029 or [email protected]

To contact the editor responsible for this story: Linus Chua in Singapore at +65-6212-1530 or [email protected]

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