(JAKARTA) Indonesia will offer its first project-based sukuk in an
auction on Oct 11, a senior Finance Ministry official said yesterday, a
move that will increase the supply of syariah instruments in the
less-developed local sukuk market. (source)
The ministry will issue project-based sukuk with maturities of
six and 21 years, syariah director Dahlan Siamat told Reuters, following
repeated delays in the issue. It will also offer six-month syariah
T-bills, and 14-year and 25-year sukuk, with a total target of 500
billion rupiah (S$74 million) in the last sukuk auction this year.
The long-awaited project-based sukuk, using underlying assets of
1,066 infrastructure projects worth 20.9 trillion rupiah including roads
and railways, will be used to fund government spending and cover a
budget deficit seen at below 2 per cent of gross domestic product this
year.
Indonesia lags neighbour Malaysia in attracting foreign investors
into the local sukuk market. Foreign ownership in Indonesian sukuk was
only 3.45 trillion rupiah, or 5.85 per cent, of total outstanding sukuk
as of Sept 30, the latest Finance Ministry data shows. This compares
with 218.09 trillion rupiah, or 31.3 per cent, in conventional
government bonds.
Analysts say foreign investors find the Indonesian syariah
instruments less liquid than conventional bonds, and the project-based
sukuk will likely draw more demand from local investors such as banks
and pension funds.
'It will depend on government's generosity because the project-based
sukuk is a new product, and uncertainty remains ... The government
should give a sweetener by offering a higher premium,' said Arga
Samudro, an analyst at Bahana Securities. -- Reuters
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