BI to lift ban on sukuk trading

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Fri, 08/22/2008 10:21 AM  |  Business

The central bank is lifting a ban preventing commercial and sharia banks from trading Islamic bonds, or sukuk, to help promote the industry's development, a deputy governor says.

Siti Chalimah Fadjrijah said Thursday that Bank Indonesia would revoke the regulation banning commercial and sharia banks from trading sukuk before they had reached maturity.

Under the new rule, which will be effected soon, banks may buy or sell both government and corporate Islamic shares as investment, Fadjrijah said.

The announcement came as the government completed its sale of Rp 5 trillion (US$546.39 million) of seven- and 10-year rupiah-denominated Islamic bonds.

The government's sukuk are scheduled to officially be traded on the Indonesia Stock Exchange on Aug. 26.

PT Danareksa Sekuritas, PT Mandiri Sekuritas and PT Trimegah Securities arranged the sale of the government's first ever sale of the bonds.

The government has identified Rp 18.3 trillion in state assets as collateral for all of its sukuk issuances, including those yet to be made.

It plans to issue dollar-denominated Islamic bonds at the end of October, according to Dahlan Siamat, the Finance Ministry's director of sharia financing.

The government hopes the issuances will help cover its 2008 budget deficit, which is estimated at Rp 90.6 trillion.

The Finance Ministry's director general for debt management Rahmat Waluyanto said the decision to lift the ban on trading was "right, although a bit late".

"BI's regulation on sukuk has been a factor that has reduced investors' appetite in buying sukuk. Sukuk is not only for investment, but for trading. Buy then, the (sukuk) market will grow," Rahmat said.

"There is no reason for banks not to buy sukuk (as the new regulation will soon be passed)," Rahmat said.

On Thursday, the government's 10-year bonds fell for a fifth straight day, the longest losing streak since June, Bloomberg reported.

The yield on the 9 percent bonds -- due September 2018 -- rose 6 basis points to 11.94 percent, according to the Government Bonds Inter-Dealer Market Association.

The price declined 0.2998 points, or Rp 2,998 per Rp 1 million face value, to 83.023 points.

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