INDONESIA - CAPITAL MARKETS - Indonesia hires Citi, HSBC, Stanchart for US$1 billion sukuk sale

JAKARTA: Indonsian Finance Ministry has appointed three underwriters to advise on a plan to sell US$1 billion sharia bonds in the third quarter.

The three underwriters are Citi, HSBC Securities and Standard Chartered Bank (Stanchart), two executives familiar with the matter.  (source)

Finance Minister Agus D. W. Martowardojo confirmed that the government has appointed 3 underwriters that will help to market the bonds in Asia, Europe and US.

Despite the unstable global condition, the minister believed Indonesia bond market is quite positive, reflected by the relatively low government securities’ yield.

“Indonesia's rupiah-denominated governmental bonds' yield is stable. The foreign currency bonds' yield slipped to 3.7% on August 22 from 3.9% on July 31, while the yield of the rupiah-denominated bonds with a 10 year tenor slipped to 6.8% from 7.04%.”

The government will conduct roadshows to a number of countries to offer the sharia bonds.

The global sharia bond issuance is a way to finance government spending, the minister said, adding that the gross amount of the government securities that will be issues is IDR205 trillion, while the net amount is IDR124 tirllion.

The ministry of finance will discuss with three state financial consultants in determining the best timing and cities for the roadshows.

“We are still preparing the paperworks and administration process to enter the global market. The underwriters have had preliminary talks with the global investors about the planned sukuk issuance.”

Indonesia's first issued global sharia bond was on April 23, 2009, where the government raised US$650 million. The type of sharia bond issued was Al Ijarah with 8.8% fixed coupon due in five years. Demands at that time were 7 times larger than the offered amount.

About 30% of Indonesia's global sharia bonds were absorbed by investors in the Middle East and other investors from Islamic countries, 40% by Asian and Indonesian investors, 19% by investors in US, and 11% from Europe.

Investment managers bought 45% of the sukuk, banks 37%, individual investors 14%, insurers and pension funds 4%.

More foreign investors

Directorate General of Debt Management’s data showed that the number of foreign investors that hold SUN have been increasing where on August 23, their holdings rose IDR4.66 trillion to IDR246.01 trillion from IDR241.35 trillion on August 15.

Foreign holdings slightly rose to 34.99% of the total IDR703.15 trillion outstanding sukuk, compared to 34.78% of the total two days earlier.

The past 2 weeks' declines in the Jakarta Composite Index has led to the IDR7.52 trillion withdrawal of foreign investment in SUN market. Foreign investment in SUN market, on August 15, dropping to IDR241.35 trillion from July's position at IDR248.87 trillion.

Handy Yunianto , Head of Fixed Income Research at PT Mandiri Sekuritas, stated that as long as the rupiah exchange rate is stable at IDR8,500-IDR8,600, foreign capital inflow to SUN market will continue.

In order to maintain capital inflow from foreign investors to SUN market, Bank Indonesia should maintain the stability of rupiah. (T05/NOM)

Source :  http://www.bisnis.com/articles/indonesia-hires-citi-hsbc-stanchart-for-us$1-billion-sukuk-sale - Aug 25, 2011