PT Bhakti Asset Management’s BIG Dana Muamalah fund, which returned 13.4 percent this year, bought rupiah-denominated government sukuk in March, the same month Standard & Poor’s raised the nation’s rating to BB, two levels below investment grade. BIG Dana, the top performer in 2010 among 67 Shariah- compliant fixed-income funds tracked by Bloomberg, expects more Indonesian companies to sell Islamic bonds next year.
“Yields will fall if the credit rating is upgraded to investment grade and more corporate sukuk issuance comes on board,” Jakarta-based Akbar Syarief, who helps oversee 700 billion rupiah ($77.6 million) at Bhakti Assets, said in an interview on Dec. 3. “Achieving similar returns for the coming year is possible.”
Six of this year’s 10 best-performing Islamic funds are from Indonesia as S&P and Moody’s Investors Service increased their credit assessments because of the nation’s improving economy and government finances. The yield on the rupiah- denominated sukuk maturing in 2015 has dropped at more than five times the pace of similar-maturity debt in Malaysia, which is rated higher at A- by S&P.
Global Inflows
The yield on Indonesia’s 11.8 percent local-currency Islamic bond due in August 2015 has declined 203 basis points, or 2.03 percentage points, this year. The rate reached a record- low 6.35 percent on Dec. 3, according to data compiled by Bloomberg. Indicative yields on ringgit sukuk dropped 38 basis points to 3.46 percent, according to an index compiled by Bank Negara Malaysia.
Mega Dana Obligasi Syariah, managed by Jakarta-based PT Mega Capital Indonesia, returned 12.1 percent this year to be the second-best performing sukuk fund. Nany Susilowati, president director of Mega Capital, didn’t return calls made to her office or reply to e-mailed questions seeking comment.
“Rating upgrades are coming next year, although a two- level increase can’t be expected until 2012,” Helmi Arman, a fixed-income analyst at PT Bank Danamon, Indonesia’s sixth- largest lender, said in an interview from Jakarta yesterday. “Yields on Indonesian bonds generally will fall further on two reasons; rating upgrades and inflows of global funds.”
Moody’s on Dec. 1 placed Indonesia on review for a possible upgrade to its Ba2 rating, two levels below investment grade.
“The economic recovery is being sustained alongside well- managed external accounts and reasonably good inflation fundamentals,” said Aninda Mitra, a vice president at Moody’s and its lead sovereign analyst for Indonesia, in a statement.
Foreign Holdings
Foreign holdings of Indonesian bonds rose 79 percent this year to a record 192.9 trillion rupiah ($21.4 billion) as of Dec. 3, according to data from the finance ministry’s website.
Global sales of sukuk, which pay returns based on asset flows to comply with the religion’s ban on interest, fell 31 percent this year to $13.8 billion, Bloomberg data show. Issuance reached a record $31 billion in 2007.
Shariah-compliant bonds returned 12 percent in 2010, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows, while debt in emerging markets gained 14 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.
The difference between the average yield for sukuk in developing nations and the London interbank offered rate has narrowed 151 basis points to 316 points since Dec. 31, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed 36 basis points to 354 this month, data compiled by Bloomberg show.
Draw Investors
Indonesia’s local-currency Islamic bonds beat the nation’s only dollar-denominated global sukuk this year. The notes returned 16.3 percent, compared with 9.3 percent for the U.S. currency debt, according to data compiled by Bloomberg.
Indonesia plans to sell Shariah-compliant notes to individual investors in the local market and a global sukuk in the first half of 2011, Rahmat Waluyanto, director-general at the Finance Ministry’s debt-management office, said Dec. 2. In February, the government sold 8.03 trillion rupiah of Islamic bonds to the general public, more than the 3 trillion rupiah target, Waluyanto said after the sale.
“We expect the returns to draw more investors to sukuk funds,” said Bhakti Asset’s Syarief.
BIG Dana increased its fund to 113 billion rupiah from 19 billion rupiah at the start of the year, according to Syarief. Mega Dana is 95 percent invested in bonds and 5 percent in money-market instruments, according to its website.
“The limited supply of corporate sukuk prompted us to buy more government sukuk,” Syarief said. “The opportunities from higher yields and capital gains due to the liquidity of government sukuk made it more attractive.”
To contact the reporters on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net; Suryani Omar in Singapore at somar6@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
Source : http://www.bloomberg.com/news/2010-12-08/best-indonesia-sukuk-fund-expects-rating-boost-on-returns-islamic-finance.html - Dec 9, 2010
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