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ORI007 attractive albeit lower yield
Despite offering a lower yield than previous government retail bonds, the Indonesian government is still confident the ORI007 is an attractive investment instrument for small investors as interest rates remain low and stock investments are volatile, fund managers said
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espite offering a lower yield than previous government retail bonds, the Indonesian government is still confident the ORI007 is an attractive investment instrument for small investors as interest rates remain low and stock investments are volatile, fund managers said.
With a 7.95 percent yield, ORI007 is considered more competitive than bank deposits, which offer an average 6 percent return.
Investing in stocks may yield close to 20 percent returns, but not without risk, said Budi Hikmat, a director at Bahana TCW Investment Management.
“The bond yield isn’t as interesting as before. But for our savings-driven society, this is still a good opportunity,” Hikmat said, adding that deposit rates would not increase in the next six months.
Hikmat also said investing in protected mutual funds, where funds are exclusively placed only in bonds, may yield between 7.5 percent and 8 percent.
One benefit in investing in the ORI007 bond instrument is that it is very liquid and is guaranteed by the government, Citibank investment head Harsya Prasetyo said.
“While protected funds may offer greater yields, not all of them are as liquid as ORI,” Prasetyo said.
Fortis Investments president director Eko P. Pratomo said ORI007 had a lower tax rate of 15 percent, compared to 20 percent imposed on bank deposits.
ORI007 is sold at Rp 1 million (US$111) per unit, with a minimum purchase of Rp 5 million and maximum Rp 3 billion. ORI007, maturing on Aug. 15, 2013, can be bought between July 15-30 this year.
The government has appointed 23 banks and investment firms to sell ORI007.
The banks are BCA, Mandiri, BNI, Panin, BII, CIMB Niaga, Citibank, Permata, Danamon, Standard Chartered, HSBC, BRI, OCBC NISP, Bukopin and Mega.
The investment firms include Danareksa Sekuritas, Trimegah Securities, Mega Capital Indonesia, OSK Nusadana Securities Indonesia, Ciptadana Securities, Reliance Securities, Lautandhana Securindo and Philip Securities Indonesia.
In one day, ORI007 received orders of Rp 758 billion, an encouraging amount compared given the overall government target of Rp 5 trillion, said Bhimantara Widyajala, director of bonds at the Finance Ministry.
“We’re optimistic the target can be achieved. We hope it will be oversubscribed,” he said.
Budi said the demand for ORI007 would be quite high considering high bank liquidity. “Market rates will remain low because of the huge amount of liquidity,” he said.
In February the government retail Islamic bond (sukuk) sold Rp 8.03 trillion, almost triple the initial target of Rp 3 trillion.
In August 2009, the government sold Rp 8.54 trillion in ORI006.
