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Political race, high interest may hinder corporate bond issuance, analysts say
Political uncertainty and high interest rate environment may affect corporate bonds issuance this year, as firms become more wary of the uncertainties.
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Illustration of Indonesian banknotes. (Shutterstock/devmograph)
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rominent credit rating agencies have said they expect Indonesian corporate bond issuances to drop this year amid high interest rates and less necessity for local firms to seek financing.
Felita, associate director of corporates at Fitch Ratings, said that domestic corporate bond issuances in the first four months of this year were significantly lower compared with the same period last year.
The drop was due to a combination of high interest rates that made firms more reluctant to seek debt financing, as well as a shift by investors toward shorter debt tenors, she said.
On the latter, the weighted average tenor of onshore issuances fell to between three and four years in the past two years, whereas between 2018 and 2020, it could be up to five years, Felita said, adding that the tenor length continued to be shorter this year.
"We have observed that the tenors went below three years between January and April this year, with the proportion of one-year tenor issuances amounting to above 50 percent, up from only 20 percent last year," Felita told The Jakarta Post on Thursday.
At the same time, this year’s value of mature corporate notes is lower than last year, which will likely signal even less need for firms to issue bonds, she said.
"In addition, companies may also consider other refinancing options, such as bank loans in view of potentially higher coupon rates [for corporate bonds]," Felita stated.
