JAKARTA (TheInsiderStories) - The Indonesian government expects the euro and yen-denominated bond issuance which amounted around Rp91 trillion or equal US$6,7 billion to be done in the first half of this year as an anticipation of the next Fed Funds Rate hikes in June, Directorate General of Financing and Risk Management stated.
In 2017, the government target to issue government bonds up to Rp686 trillion in gross, around 20% or Rp137 trillion will be allocated for foreign currency denominations bonds. Previously, the government has issued global bond worth US$3.5 billion or equals to Rp46 trillion in the end of last year. Thus, there is still more space to issue around Rp91 trillion in foreign currency denomination bonds.
“We decide to keep international bond issuance portion of 20%. We already issued the large size bonds. Unfortunately, we cannot expose about size or timing of the issuance but our strategy is that we will anticipate the next rise of FFR,” Robert Pakpahan, Director General of Financing and Risk Management said last Thursday (Mar 30).
He predicted that the Fed would raise the FFR in the second half of this year so it would increase government bond cost of funds. Therefore, he expected that 60% government bond will be issued no later than June. Recently, the government also issued global sharia bond or sukuk worth US$ 3 billion in March.
In this regard, the government is monitoring the politics and social condition in Europe which can affect the global financial market, especially the presidential election in France and Germany. “While, Samurai Bond market condition is relatively stable compared with Europe,” he added.
Global Sukuk
The government Indonesia has auctioned US dollar denominated of global sharia bond or Global Sukuk worth US$3 billion. The incoming bids from investor reached US$10.84 billion or oversubscribed by 3.6 times, Directorate General of Budget Financing and Risk Management stated.
The Global Sukuk which issued on Thursday (Mar 23) was the biggest sukuk issuance since the first issue in 2012. The Indonesian government issued two series of global sukuk — 5-year tenor with the yield of 3.4% per year and 10-year tenor with yield of 4.15% per year.
“We are quite happy with the pricing and yield,” said Robert Pakpahan, Director General of Budget Financing and Risk Management, The Finance Ministry on Thursday (Mar 30).
The investor of global sukuk 5-year tenor series was coming from 27% Islamic countries (including Middle East and Malaysia), 21% US, 28% Asian countries (excluding Indonesia and Malaysia), 14% European countries, and 10% Indonesia.
While investor of global sukuk for 10-year tenor series was coming from 29% Islamic countries, 29% US, 23% Asian countries, 10% Indonesia, and 9% European countries.
“The Islamic investors, especially in Middle East, fell slightly because the availability of funds to invest in Sukuk decrease in line with low oil prices,” he added.
Managing Director of Mandiri Sekuritas, Laksono Widodo, who became one of the joint lead managers on issuance of global sukuk emissions said global investor has positive response about Indonesia global sukuk.
“When we participated in a roadshow to Kuala Lumpur, Jeddah, London, Dubai, and Abu Dhabi, there are good appetite from investors,” he said.
Separately, Senior Deputy Governor of Bank Indonesia Mirza Adityaswara welcomed the global sukuk issuance by the government. According to him, the high appetite of global investors to buy government bonds showing the good condition of Indonesia amid the Fed Fund Rate hikes in March.
“In addition, there was a change of leadership in the US that people consider it more risky. It is good when the government could issue global sukuk and oversubscribed nearly four times,” he said.
Earlier, Moody’s Investors Service also embedded a positive rating (Baa3) for global sukuk issued by the Indonesian government in March 2017. In addition, the value of global sukuk issuance given a positive rating was also increased from US$ 10 billion to US$ 15 billion.
In Moody’s view, the global sukuk payment obligations undertaken through PT Publishers SBSN Indonesia III are in the rank pari passu (equal) with the issuance of other senior unsecured debt other government. This rating is also in line with the Indonesian government bond ratings in general in the level of Baa3.
The listings raised the total nominal value of all Sukuk listed in Dubai above $50 billion for the first time, to a global record high of $52.06 billion. The Indonesian government is the largest issuer on the Exchange, with a total value of $11.5 billion from 8 listings.
Hamed Ali, Chief Executive of Nasdaq Dubai, said, “The rapid expansion of Dubai’s Sukuk market is based on intellectual as well as financial input from a wide range of issuers, investors and market participants based in dozens of countries. There is a common desire to come together to achieve new standards of excellence and efficiency and Dubai will further strengthen its role as a facilitator of this process.”
Mena region Sukuk issuers with Dubai listings include government and private sector entities active in a variety of industries including property, education, leisure, transport, finance, and infrastructure development. (*)