0 Bond Boom at Indo Premier

Indo Premier Securities, one of Indonesia’s most active brokerage firms, expects to arrange Rp 11 trillion ($1.14 billion) in corporate bond sales this year, a company director says. Rayendra Tobing, Indo Premier’s director of investment banking, said this year’s target would total more than the Rp 9.7 trillion from 26 rupiah-denominated bond sales it helped arrange last year. According to Reuters, Indo Premier is ranked number one for Indonesian bond issuances in terms of total value. 

Rayendra said the company has already secured the right to arrange five bond sales and three initial public offerings. The five bond sales are valued at a combined Rp 5 trillion while the three IPOs may fetch Rp 2 trillion. All bond issuances are to come from the financial sector while the IPOs will be in the “real sector” like manufacturing, he said. Combining IPOs and other securities, Indo Premier may underwrite as much as Rp 12 trillion this year, Rayendra added, higher than its Rp 10.5 trillion last year. 

“Strong consumption in Indonesia is pushing these companies to expand and an IPO is one of their sources of financing,” he said. In terms of demand for stocks, Rayendra said: “As long as the companies are attractive and the shares are offered at an attractive price, demand will be good.” Indo Premier forecasts a total of Rp 54.58 trillion in corporate bonds sales across the entire industry in Indonesia this year, as desire by Indonesian companies to tap cheap financing remains strong. 

Indo Premier’s industry-wide prediction came from reports that Indo Premier had compiled since October, Seto Wardono, an economist with the brokerage, told journalists in Jakarta on Tuesday. He added that the estimate did not include the issuance of continuous bonds — bonds that are sold in stages within two years. “The low interest rate will continue to be a factor [encouraging] companies to issue bonds,” Seto said. Bank Indonesia has since last February kept its benchmark interest rate unchanged at 5.75 percent, the lowest since it was introduced in July 2005. 

The low cost to borrow has prompted Indonesian companies to opt for bonds over bank loans to raise funds. Fitch Ratings and Moody’s Investors Service, two global rating agencies, have raised the country’s sovereign debt rating to investment grade, making investment in the country’s bonds more attractive. According to data from the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), a total of Rp 55.57 trillion in bonds were issued last year.

source : the jakarta globe