The rate on the benchmark 8.8 percent Islamic note due April 2014 fell 7 basis points, or 0.07 of a percentage point, this week to 3.47 percent and reached 3.4 percent, the lowest level since Jan. 20, according to the Royal Bank of Scotland Group prices. (source)
That’s a turnaround from last month’s climb to a seven-month high of 3.84 percent as inflation accelerated to 7 percent in January, the fastest pace in more than two years. Consumer price gains eased to 6.8 percent last month.
Optimism for a ratings upgrade and inflows from overseas investors avoiding the Middle East are boosting demand for the nation’s sukuk, according to CIMB-Principal Islamic Asset Management and Mandiri Manajemen Investasi.
Fitch Ratings raised the assessment on Indonesia to “positive” from “stable” on Feb. 24 while keeping the ranking at BB+, a step below investment-grade, citing favorable economic prospects.
“Indonesia is appealing,” Kuala Lumpur-based Zeid Ayer, a money manager who helps manage $1.6 billion of Shariah-compliant assets at CIMB-Principal Islamic, said in an interview yesterday. “A lot of foreign money flowed into Indonesia and its currency appreciated strongly.”
The economy expanded 6.1 percent in 2010, the most in six years, and the central bank raised borrowing costs last month from a record low to temper inflation. Policy makers left the benchmark rate at 6.75 percent on Fridaty. Growth will accelerate to as much as 6.5 percent this year, the central bank forecasts.
Moody’s Investors Service lifted Indonesia’s rating to Ba1 on Jan. 17, also one level below investment grade, with a “stable” outlook. Standard & Poor’s rates the country BB, two steps below investment.
Sales of Shariah-compliant debt may rise this year and help ease a supply shortage after Dahlan Siamat, director for Islamic financing at the Finance Ministry, said the government was waiting on House approval to allow Rp 30 trillion ($3.4 billion) of assets to be used to back sukuk, or Islamic bonds.
“Macroeconomic conditions are good, and the recent rating by Fitch has helped increase investor demand” for sukuk, Siamat said in an interview from Jakarta. “Yes, there’s the expectation that inflation might quicken, but you have to look at other economic conditions. Growth is good and our outlook is stable.”
Surging crude oil prices and concern the government will reduce fuel subsidies in a nation that’s a net importer are putting pressure on inflation.
“We will discuss with parliament before we decide” whether to delay a plan to limit the sale of subsidized fuel, Coordinating Minister for the Economy Hatta Rajasa said last week.
Core inflation, which excludes food and fuel, may climb to 5 percent this year from 4.28 percent at the end of 2010, the central bank said on Jan. 7. Overall inflation will range between 4 percent and 6 percent this year, policy makers said after BI’s rate decision last week.
Crude reached $103.41 a barrel on Feb. 24, the highest level since September 2008, and traded at $102.62 in New York. Prices are up 12.3 percent this year.
“Once Indonesia is upgraded to investment grade, definitely more foreign funds will come in,” said Priyo Santoso, head of investment at Jakarta-based Mandiri Manajemen.
Funds based overseas increased their holdings of Indonesian government debt to Rp 201.1 trillion as of March 2, from Rp 195 trillion at the end of January, according to data from the Finance Ministry’s debt management office. The rupiah is Asia’s best performing currency this year, rising 2.1 percent.
Global sales of sukuk, which pay asset returns to comply with Islam’s ban on interest rates, are showing signs of a recovery this year after slumping in 2010. Issuance has reached $3.9 billion from $676 million in the same period last year, according to data compiled by Bloomberg. Offerings fell 15 percent to $17.1 billion in all of 2010.
Shariah-compliant bonds are little changed this year after gaining 12.8 percent in 2010, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Debt in developing markets is also little changed and climbed 12.2 percent last year, JPMorgan Chase’s EMBI Global Diversified Index shows.
The difference between the average yield for sukuk and the London interbank offered rate declined 2 basis points this week to 318 on Thursday, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The average yield was little changed for the week at 5.25 percent.
The yield on Malaysia’s 3.928 percent dollar sukuk due in June 2015 climbed eight basis points for the week to 2.99, RBS prices show. The notes returned 0.1 percent this year.
Siamat at the Finance Ministry said Indonesia’s plan for a second global sukuk was still possible, though he couldn’t say when that may happen. Rahmat Waluyanto, director general of the ministry’s debt-management office, said an offering may take place in the first half of 2011 after postponing a sale last year.
Bloomberg
Source : http://www.thejakartaglobe.com/business/indonesia-dollar-denominated-bonds-drop-to-six-week-low/427065 - March 6, 2011
No comments:
Post a Comment