JAKARTA/KUALA LUMPUR: Indonesia's elevation to investment grade may propel the country's sukuk to outperform Malaysian bonds in 2012 after trailing the debt this year.
Fitch Ratings, which raised Indonesia to BBB- last week, rates Malaysia three levels higher at A-. Yields on Indonesia's 8.8 per cent dollar-denominated Islamic securities due April 2014 were at 3.30 per cent yesterday, compared with 2.62 per cent for Malaysia's 3.928 per cent global syariah-compliant notes due in 2015, according to prices from Royal Bank of Scotland Group plc. (source)
Fitch Ratings, which raised Indonesia to BBB- last week, rates Malaysia three levels higher at A-. Yields on Indonesia's 8.8 per cent dollar-denominated Islamic securities due April 2014 were at 3.30 per cent yesterday, compared with 2.62 per cent for Malaysia's 3.928 per cent global syariah-compliant notes due in 2015, according to prices from Royal Bank of Scotland Group plc. (source)
"There's a good chance that the Indonesian sukuk will give better returns than Malaysia's as they are starting from a lower base," Hang Tuah Amin Tajudin, vice president of Kuala Lumpur-based OCBC Al-Amin Bank Bhd, the Islamic unit of Singapore's Oversea-Chinese Banking Corp, said in an interview on Monday. "Borrowing costs may come down further when Standard & Poor's and Moody's Investors Service follow Fitch's lead and upgrade Indonesia next year."
The Indonesian bond has returned 2.7 per cent this year, compared with 3.9 per cent for the Malaysian security. That compares with returns of 9.0 per cent and 6.5 per cent, respectively, last year.
Moody's lifted Indonesia to Ba1 in January, the highest non-investment grade, while S&P raised it to BB+ in April, its highest junk rating. They both have positive outlooks.
The cost of insuring Indonesian and Malaysian debt from default is less than that for France as the International Monetary Fund predicts developing Asian economies will grow 8.0 per cent next year, compared with 1.1 per cent for the euro area.
Five-year credit-default swaps on French government debt were at 231 basis points in London on Monday, compared with 215 for Indonesia and 148 for Malaysia, according to data provider CMA, which is owned by CME Group Inc and compiles prices quoted by dealers in privately negotiated markets. Indonesia sold seven-year dollar sukuk at a yield of 4.0 per cent on Nov 14, 200 basis points, or two percentage points, less than the yield demanded on Italian five-year debt sold the same day.
Fitch upgraded Indonesia's credit rating on Dec 15, citing strong economic growth and declining public debt. The yield on the Indonesian 8.8 per cent sukuk dropped 32 basis points the next day, the most in 18 months. The Malaysian bond yield slid four basis points.
"The rating upgrade will widen the pool of investors," Mohd Farid Kamarudin, who helps manage RM1.3 billion of Islamic assets at AmInvestment Management Sdn Bhd in Kuala Lumpur, said in an interview on Monday. "The Indonesian government can be expected to sell more sukuk as the upgrade will make it cheaper for them to tap the market."
Global sales of sukuk, which pay returns on assets to comply with Islam's ban on interest, are having the second-best year on record. Offerings reached US$26.4 billion, from US$15.7 billion in the same period last year, short of the record US$31 billion sold in 2007, data compiled by Bloomberg show.Bloomberg
No comments:
Post a Comment