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Monday, November 30, 2009

Bond Issuance May Reach IDR29 Trillion: Increase in Indonesia's CDS Predicted to only be Temporary

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as published in Bisnis Indonesia daily newspaper
Monday, 30/11/2009 00:00 WIB
Bond Issuance May Reach IDR29 Trillion
Increase in Indonesia's CDS Predicted to only be Temporary

JAKARTA: Corporate bond issuance next year is projected at IDR27 trillion-IDR29 trillion, rising 5%-10% from IDR26.5 trillion this year.

Data by Bisnis show the total amount of corporate bonds maturing next year will reach IDR10.94 trillion, while the amount of T-bonds maturing next year will hit IDR70.47 trillion.

Data by Indonesia Stock Exchange (BEI) expose the volume of rupiah-denominated bond and Islamic bond so far this year has reached IDR19.33 trillion. Approaching the yearend, there will be additional IDR7.13 trillion in bond, leading to a total issuance of IDR26.46 trillion this year.

"Bond and Islamic bond issuances next year will grow 5%-10% from this year as several companies will be interested in entering the bond market in line with economic growth," observed a corporate bond analyst at publicly listed PT Trimegah Securities Octavianus Bramantya last weekend.

President Director of PT Pemeringkat Efek Indonesia (Pefindo) Kahlil Rowter viewed the Dubai World debt crisis would not hugely impact the T-bond and corporate bond market in the country. However, he admitted the debt crisis would impact the global bond market for a certain period of time.

"The debt crisis will not affect Indonesia much nor bond issuance target next year, which is projected at IDR25 trillion - IDR30 trillion," he said.

Kahlil took example that in the first quarter of 2009, the global market condition, reflected from Indonesia's high credit default swap (CDS), didn't discourage issuers to issue bond nor dispirited investors.

He explained the increase in Indonesia's CDS in the past two days would not last long, despite his belief that there would be fund withdrawal from the emerging bond markets for a certain time.

The CDS of five-year rupiah-denominated Indonesian T-bonds surged from 202.21 on November 25 to 238.64 on November 27.

Head of Pricing at Pefindo Ronny Wicaksono predicted bond issuance would be flourishing in the first semester of 2010 since the benchmark interest rate was still above the level desired by investors.

Several issuers whose bonds will mature next year are Astra Sedaya Finance (IDR1.15 trillion), Federal International Finance (IDR855 billion), Apexindo Pratama Duta (IDR750 billion), BTN (IDR750 billion), Indosat (IDR640 billion), and Jasa Marga (IDR650 billion).

State Budget Financing
Director General of Debt Management at the Department of Finance Rahmat Waluyanto disclosed the government had prepared funds to service T-bonds that would mature next year. "We have allocated funds for T-bonds through the State Budget."

Rahmat added the Department of Finance was optimistic domestic and global T-bond issuances would attract investors, thanks to better rating outlooks as released by Moody's and S&P.

He continued several analysts viewed the Dubai bond crisis would shrink investment flow into emerging countries, which would be potential to affect Indonesia's T-bond prices.

Foreign investor ownership of T-bonds also surged to IDR104.88 trillion as of November 20 from IDR103.3 trillion as of November 13.

However, Fauzi Ichsan, an economist at Standard Chartered Bank, cited economic players started worrying about the follow-up impacts of the Dubai World debt crisis, leading to negative sentiments in the domestic market for a short term.

In the short-term, Indonesian market players would take a defensive position on worries the phenomenon was only the beginning of the worse debt crisis to come in many countries. (Bisnis/21/agi)



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