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Indonesian firms look inward for financing as global volatility runs amok
Global economic uncertainty is forcing firms in Asia, including Indonesia, to fulfill their financing needs domestically as the capital market turns volatile and dampens corporate bond issuance.
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More than 850 Indonesian issuers (or guarantors) have issued global bonds as of Aug. 31, 2019. (Courtesy of Freepik)
G
lobal economic uncertainty has forced firms in Asia, including Indonesia, to fulfill their financing needs domestically as the capital market turns volatile and dampens corporate bond issuance.
Citing Moody's Asia High-Yield Interest Chartbook report, issuance among high-yield nonfinancial firms in South and Southeast Asia (S&SEA) only reached US$90 million in the first half of the year, the lowest in years.
Over the past five years, for comparison, bond issuance always hit between $2 billion and $4 billion. The report also states that 21 of 39 S&SEA companies rated by Moody's are based in Indonesia.
The sluggish corporate bond issuance in Indonesia was on par with similar trends across Asia, partly driven by the absence of Chinese firms’ issuance.
As a result, Moody’s noted, companies had begun to rely on domestic banks and capital markets to meet their refinancing needs. This trend also persisted in spite of the ability to maintain stable debt ratings among most S&SEA firms.
“The sharp drop in Asian high-yield issuance reflects a flight to quality driven by the uncertain macroeconomic environment,” Annalisa DiChiara, senior vice president at Moody's said in a statement on July 26.
Read also: Fed hike raises pressure on Bank Indonesia: Economists
