T

he State-Owned Enterprises (SOEs) Ministry has asked large state-owned companies to issue bonds to help shore up the flagging rupiah, which dropped sharply in recent days amid growing fears over the worsening of the economic outlook due to the COVID-19 pandemic.

SOEs Minister Erick Thohir said he had asked several state-owned firms with good ratings, such as Bank Mandiri and Bank Rakyat Indonesia (BRI), to seek funding through bond issuance to help strengthen the rupiah, which had sharply dropped in recent weeks amid worsening economic outlook.

“We only instructed state-owned firms with good ratings like Bank Mandiri, BRI and Pertamina to issue the bonds,” he said during a teleconference with the media, without detailing the currency of the bonds.

The bonds issued by large local companies, especially major state-owned companies, usually attract foreign institutional buyers. The purchases by foreign investors have also help increase the country’s foreign exchange reserves.

The rupiah slightly strengthened to 16,485 per US dollar on Tuesday afternoon after falling 3.85 percent to 16,575 per dollar on Monday. The rupiah, which has lost 19.54 percent of its value since the beginning of this year, is billed as the weakest currency in Asia.

Erick said the ministry was still in talks with state-owned companies on the size of the bonds that could be issued. The minister also said the timing of issuance should be carefully set, given growing uncertainty in the global economy.

Such a sentiment was echoed by Bank Mandiri treasury and international banking director Darmawan Junaidi, who said the bank continued to monitor the latest market developments to find the right time to realize its plan to issue global bonds worth US$1.25 billion

“We are still sticking with the bond offering plan. But he has to look at the market situation,” he told The Jakarta Post on Monday via text message, adding that the bank had yet to determine the value of the bond issuance for this year.

Bank Mandiri president director Royke Tumilaar said on Jan. 24 that the global bonds would be part of the $2 billion bonds issued by the bank in 2019 and 2020.

He said the bank planned to issue 1.25 billion bonds in the second or third quarter of this year, depending on the situation in the local and global bond market. In April, 2019, Mandiri issued $750 bonds, as part of the $2 billion bond plan.

Given the fact that investors all over the world have pulled out of instruments such as stocks and bonds and resorted to cash amid the pandemic, Anugerah Sekuritas Indonesia fixed income analyst Ramdhan Ario Maruto said SOEs should think twice about issuing both rupiah and dollar denominated bonds.

“Most investors are still in wait-and-see mode while they monitor the latest situation of the COVID-19 pandemic,” he told the Post over the phone.