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Tuesday, June 22, 2010

SUN price skyrocketing: Moody's increases Indonesia debt rating prospect

Tuesday, 22/06/2010 00:00 WIB
SUN price skyrocketing: Moody's increases Indonesia debt rating prospect

Irvin Avriano A.

JAKARTA: The government debt rating prospect from stable to positive level given by the Moody's Investor Ser-vices yesterday gave a boost to the government bond (SUN) trade and price at secondary market by 100-250 basis points (bps).

Based on the data of the Inter Dealer Market Association (IDMA/Himadsun), the SUN price index scored 159 bps from the level of 102.8 percent to 104.43 percent triggered by the massive buy of foreign investors upon considering the diminishing risk of investment.

"The buy action happened yesterday was the overseas investors typical larg amount of transaction. Rarely local investors buy in such a large amount of buy," said Fixed Income Division Head of PT Anugerah Securindo Indah Ramdhan Ario Maruto yesterday.

The skyrocketing SUN price was seen particularly to the FR007 series by 15 bps, FR0052 by 313 bps, and FR0040 by 145 bps. The mounting price continued the significant rally since a month before or last week in particular.

As to Ramdhan, SUN hike happened was not due simply to the upgrading prospect of Indonesia rating but also the positive sentiment of the appreciation of Yuan China leading to US dollar depreciation to almost all Asian currencies including rupiah.

The other reason is the time limit factor for foreign investors possession to the BI promissory notes (SBI) which led the investors composition of portfolio to SUN.

The portion of foreign ownership portion of SUN also increased into 24.68 percent by end of last week from 24.31 percent June 15. That was the top since the SUN issuance due to the surpassing position of April 29 of 24.61 percent.

The skyrocketing SUN price which is on contrary to the yield level here reflected the less expensive cost of fund borne by the government and also corporation to seek funding resource at the market.

The escalating SUN market situation also happened to the stock market. Yesterday, the index hit the top record along the history at 2,981.28 as from the previous record of 2,971.25 on April 30, 2010. The index was closed at robust position by 0.42 percent at the level of 2,941.90.

The soaring index also happened simultaneously to the soaring Asian regional bourse and global bourse driven by the sentiment of China to provide flexibility of yuan. Market considered the policy to upsize liquidity of global fund flow.

Moody's rating yesterday upgraded the outlook prospect of rupiah and global denominated bond rating in Indonesia from stable to positive level. Indonesia bond rating was set at Ba2 level.

The mounting rating prospect here also happened to the ceiling of global denominated bond rating from Ba1 level and the ceiling of global denominated deposit rating at Ba3 level.

The growing rating also forced Moody's to increase the rating prospect of two other companies, PLN and PGN from stable to positive levels. The rating of both firms was set at Ba2.

Moody's last rating action to Indonesia was on September 16, 2009 as from Ba2 level with stable outlook.

Separately, Deputy Governor of Bank Indonesia Hartadi A. Sarwono said the positive outlook given by Moody's showed the potential chances to increase Indonesia rating to the investment grade in the upcoming year still require two notches.

As to him, the revision made by Moody's was based on the expectation and it is time to change noting that Moody's rating is lower than rating given by S&P (BB/positive) and the Fitch (BB+stable).

Finance Minister Agus D.W. Martowardojo said the mounting debt rating encourage the government to maintain monetary and fiscal stability to meet the investment grade.

Economist of Mandiri Sekuritas Destry Damayanti said the so much awaited now is the re-rating story in which Indonesia is projected to be back to grad investment level." (Bisnis/iaa/agi/aca/hta/bsi)

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