www.thejakartaglobe.com - Indonesia plans to raise the equivalent of almost $2 billion in combined
yen- and dollar-denominated Islamic bonds later this year as part of
its efforts to plug a widening budget deficit.
Southeast Asia’s
largest economy plans sell $750 million of so-called samurai bonds and
$1 billion of US-currency bonds, both of them sukuk, in October.
“The
figures and timing are still moving,” Robert Pakpahan, acting chief of
the debt management office at the Finance Ministry, told the Jakarta
Globe via text message on Friday. (source)
Indonesian officials will
travel overseas to gauge investor demand in the notes, Robert said,
without providing further details.
The government has been
selling both conventional and Islamic bonds in recent years to help plug
its budget deficit, which is forecast to reach 2.3 percent of gross
domestic product this year.
This year’s US-dollar sukuk will be
the country’s third sale of such notes, after the sale of similar notes
last year and in 2009.
Indonesia last sold global
Shariah-compliant debt on Nov. 14 last year. The $1 billion of debt due
in November 2018 was auctioned at a yield of 4 percent. That compared to
an 8.8 percent yield on the debut sale of five-year Islamic dollar
bonds in April 2009, which raised $650 million.
In the 2009
sale, the government received orders valued at $4.7 billion, according
to Ministry of Finance data. Buyers from Asia accounted for 40 percent
of the sale, while Middle East investors bought 30 percent of the sale,
Americans purchased 19 percent and Europeans acquired the remaining 11
percent.
Sukuk bonds comply with Shariah law by using asset returns to pay investors instead of offering interest.
This
year’s samurai bond sale will be the second for the country. Indonesia
sold 35 billion yen ($373 million) of 10-year, 2.73 percent bonds
guaranteed by the Japan Bank for International Cooperation in July 2009.
The government hired Daiwa Securities Capital Markets and Nomura
Securities to help sell the yen-denominated bonds.
Indonesia has
benefited from an upgrade in the assessment of its sovereign debt to
investment grade by Fitch Ratings late last year and Moody’s Investors
Service early this year. The rating is helping to entice foreign
investors to buy the country’s debt paper.
Increasing foreign
investment is expected to strengthen the rupiah, which has fallen in
recent months, prompting the central bank to attempt to stabilize the
local currency by selling dollars in order to buy rupiah.
Bank
Indonesia’s foreign exchange reserves fell to $106.56 billion in July,
down from a high of $124 billion in August last year.
The Middle
East has the world’s biggest US-dollar sukuk market, followed by
Malaysia and Indonesia. Muslims make up more than 85 percent of
Indonesia’s population of 240 million.
Finance Minister Agus
Martowardojo has said previously that the government plans to raise as
much as $1 billion from US-dollar sukuk sales this year.
Beyond
sukuk, the government raised $2.5 billion by selling dollar-denominated
bonds in April. Its sale of both dollar- and rupiah-denominated bonds
date back to 2002, with the funds used to cover government deficits.
The
government has identified underlying assets valued at Rp 34 trillion
($3.6 billion) that have been approved by the House of Representatives
to support the debt sale. Rent on state-owned lands and buildings is one
form of payment for such securities.
The samurai bonds
represent just the latest move to increase economic engagement between
Indonesia and Japan, a former economic powerhouse grappling with
sluggish growth.
Actual investment from Japan reached $1.5 billion in 2011, more than double the 2010 amount of $713 million.
Bank
Negara Indonesia recently established a “Japan Desk” to deal with the
approximately 1,000 Japanese companies operating in Indonesia.
Toyota
is one of approximately 1,000 Japanese companies with a presence in
Indonesia. Economic ties between the North Asian and Southeast Asian
nations are set to grow with ‘samurai’ sukuk bonds.
Source: http://www.thejakartaglobe.com/markets/indonesia-to-sell-175-billion-in-yen-and-us-dollar-sukuk/537267 - Aug 11, 2012
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