Singapore. Legislation aimed at speeding up infrastructure projects will improve Indonesia’s chance of a debt-rating upgrade, says Moody’s Investors Service, as yields on the country’s Islamic bonds near a three-month low.
The yield on the sukuk due in 2014 fell the most in five quarters in the three months until Dec. 31, dropping 85 basis points to 2.96 percent. (source)
The yield on the sukuk due in 2014 fell the most in five quarters in the three months until Dec. 31, dropping 85 basis points to 2.96 percent. (source)
Recent developments “are potential rating triggers, including the passage of the land-acquisition bill” last month, said Christian de Guzman, a Singapore-based assistant vice president at Moody’s.
Fitch Ratings lifted Indonesia to investment grade last month, while Moody’s rates the nation’s debt Ba1, its highest junk level.
The difference in yields between Indonesia’s 8.8 percent Shariah-compliant bond due in April 2014 and Malaysia’s 3.928 percent sukuk due in 2015 narrowed 65 basis points in the past three months to 37 today, according to prices from Royal Bank of Scotland.
Southeast Asia’s largest economy will expand 6.2 percent this year, faster than the 4.9 percent projection for Malaysia, surveys of economists show.
“Economic growth is proving to be resilient to external headwinds that have adversely affected other countries in the region,” de Guzman said.
“Issues related to governance and the depth of capital markets remain key concerns.”
Lawmakers approved the land-acquisition bill in Jakarta on Dec. 16. The legislation, which becomes law once it is signed by President Susilo Bambang Yudhoyono, would allow Indonesia to accelerate road, port and airport projects.
Yudhoyono has pledged average 6.6 percent annual economic growth in his second five-year term, which ends in 2014. Infrastructure spending has been slowed by project delays caused by land disputes.
Standard and Poor’s may follow Fitch should the government continue to improve fiscal, administrative and structural reforms, the New York-based ratings company said on Dec. 20.
Agost Benard, S&P’s Singapore-based associate director, reiterated the company’s stance in an interview on Wednesday.
Fitch raised Indonesia’s long-term foreign and local currency rating to BBB-, the lowest investment-grade level, on Dec. 15, putting it on a par with India.
Moody’s lifted Indonesia to Ba1 in January 2011, while S&P raised the country to BB+ in April, its highest junk rating. Both companies have positive outlooks on their ratings.
“Moody’s and S&P are expected to upgrade Indonesia by 2013, if the country’s economic resilience and fiscal health prove relatively immune to the global economic slowdown,” Malek Khodr Temsah, assistant vice president of treasury and investment at Manama, Bahrain-based Albaraka Banking Group BSC, said in an interview on Wednesday.
An upgrade “will open the doors to significant levels of foreign investment,” he said.
Foreign ownership of rupiah-denominated government debt rose 14 percent to Rp 222.86 trillion ($24.2 billion) last year, according to Finance Ministry data. The government sold $1 billion of seven-year Shariah-compliant bonds at a yield of 4 percent in November.
No comments:
Post a Comment