Business of Bond Issuance Expected to Improve in Q2

11, May 2015 | Author: Embassy of Indonesia

Source: Antara News

Jakarta (ANTARA News) — Despite delaying the issuance of bonds in Indonesia due to the economic gloom last year, several companies see better prospects in the second quarter of 2015 even though it is still overshadowed by economic slowdown.

An analyst of PT Pefindo Riset Konsultasi, Guntur Tri Hariyanto, said that the prospects of issuing corporate bonds in Indonesia in the second quarter of 2015 will be better, although the downward trend of the economy and the weakening of the rupiah will continue to prevail.

“Since early this year, the performance of Indonesian corporate bonds has been one of the best in the world, despite being overshadowed by risks at home,” Hariyanto stated on Friday.

He added that domestic bonds received positive response from investors because they offered high coupon interest amid the downward trend in the coupon values of global bonds.

For instance, the yield of the governments 10-year bonds, which serve as a reference of bond coupons in the country, reached 7.7 percent as compared to that of the United States market, which offered 2.1 percent.

The conviction of the investors who responded favorably has prompted numerous companies to plan the issuance of bonds in the second quarter of this year.

A number of state-owned construction companies, for example, have planned to issue bonds worth Rp50 trillion, especially to finance infrastructure projects in the country, State-Owned Enterprises Minister Rini Soemarno affirmed.

“The bond issuance plan worth Rp50 trillion is still being studied. It is hoped that it can be realized in August 2015,” she said on Thursday.

She added that the bonds will be absorbed by the China Development Bank and the Industrial and Commercial Bank of China.

“These Chinese banks have expressed their commitment to support and finance the infrastructure development projects that have already commenced,” Soemarno noted.

This also was pointed out by Hariyanto, who said that numerous financing companies will issue bonds as the nature of these businesses demands big volume to channel credits.

He predicted that in the second quarter of this year, there will be a number of corporate bonds that will be issued by financing companies for their credit expansion.

The other sectors, Hariyanto added, include the property sector wherein companies have the opportunity to take advantage of credit expansion by financing firms. Companies that deal with property will have a chance to borrow money to finance the expansion of their businesses, such as the construction of their property projects.

“However, market players are expected to be careful and pay attention to risks as the economy is still witnessing a slowdown, while bond issuers continue to be weak,” he cautioned.

According to Hariyanto, market players are also expected to take into account the external risk factors following uncertainties in interest rate increases in the United States (the Federal fund rate).

“The high portion of bonds owned by foreigners in both the government and private corporate enterprises can have a negative impact if the Fed realizes its plan to raise the Fed fund rate,” he stated.

Overall, the analyst is optimistic that the potential of bond investment at home is still improving.

Moreover, the government will soon realize its budget spending on infrastructure projects. This will guarantee that the domestic bond market will stabilize by the end of the year.

To carry out its infrastructure projects, the government will offer bonds worth Rp50 trillion through state companies, among other measures.

Minister Rini Soemarno noted that proceeds from the bond issuance will be used to finance a number of projects, including the Trans-Sumatra Toll Road project.

“The implementation of the Trans-Sumatra Toll Road project must be accelerated so that it is operational during the Asian Games in Jakarta and Palembang (in Sumatra) in 2018,” Soemarno emphasized.

To speed up and ease the development of the 324-kilometer long toll road, each member of the consortium involved has been assigned certain sections of the project.

Hutama Karya, for example, has been assigned to develop the Kilometer 0 to Kilometer 30 section, while Adhi Karya has been assigned the Kilometer 30 to Kilometer 60 section. Similarly, others have been assigned specific sections to ensure that the project is completed within three years, the minister explained.

Soemarno did not give any details regarding the bond issuance process to be followed, i.e. she did not mention whether the bonds will be issued exclusively by state-owned companies or whether they will issue the bonds jointly.

“I myself tend to pool the issuance of bonds because several infrastructure projects will be carried out by state-owned firms through a consortium,” she noted.

In addition, Deputy for Financial, Construction and Other Services Gatot Trihargo said that the plan was still being handled by securities company Bahana Securities.

Furthermore, Assessment Director of the Indonesian Stock Exchange (BEI) Hoesen revealed that his office has registered 12 companies that are going to issue bonds worth Rp23.05 trillion in the second quarter of this year.

“In terms of value, this is bigger than that in the same period last year,” Hoesen affirmed.

According to data from the BEI, the 12 companies that plan to issue bonds in the second quarter include Indomobil Finance Indonesia, Mandala Multifinance Tbk, Bank BNI Syariah, Federal International Finance, and Telekomunikasi Indonesia Tbk.

Among the others are Modernland Realty Tbk, Summarecon Agung Tbk, Adira Multi Finance Tbk, Bank Bukopin Tbk, Bank Rakyat Indonesia Tbk, Sarana Multigriya Finansial (Persero), and Bank Tabungan Negara Tbk.

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