Subsequently, state-owned construction firm PT Hutama Karya’s first-ever dollar-denominated bonds issuance received a warm welcome from global investors despite the fact that most of its road show for this was done virtually due to social restrictions.

The Jakarta Post’s Riska Rahman interviewed Deutsche Bank Indonesia country chief officer Siantoro Goeyardi via email on May 29 to learn more about global investors’ views on Indonesian assets amid the pandemic and how the outbreak has changed the way the bank and its clients, as well as issuers and investors, interact with each other. Here are excerpts from the interview.

Question: Which business line or type of product or service has been the biggest contributor to Deutsche Bank Indonesia’s business operations?

Answer: Since the onset of the pandemic, our investment and corporate banking business has remained stable and we continue to serve our institutional investors and corporate clients, the vast majority of which are multinationals. However, during the height of the pandemic outbreak, when markets were most volatile in March, our businesses saw both higher trading and lending volumes. 

Overall, the bank had a solid first quarter performance in Indonesia, [with] profits up approximately 15 percent on the same period last year, despite the coronavirus. This is in line with our global group results for the first quarter of 2020, in which the bank saw 13 percent growth in fixed income and currencies globally with strong growth in FX and rates in the first quarter of this year.

Are you seeing a shift in the types of products and services required by clients during the pandemic?

There has not been a significant shift in products and services for clients, although working capital and cash management have been critical for clients.

While our business mix has not really shifted, we have certainly seen a shift in how we do business. Many more clients are communicating with us electronically through our electronic FX platforms.

The uptake in digital platform usage will accelerate investment into platforms, because the functionality and efficiency has been clear to see during the COVID-19 period and it has proven that everything can be done electronically with much less paper, although face-to-face meetings will always be important for maintaining relationships.

The government seems to be the biggest bond issuer in Indonesia, especially during the pandemic, with its plans to triple the amount of debt to around Rp 1 quadrillion (US$68.12 billion). How has that affected global investors’ appetite, especially since the global market conditions seem to be unfavorable at the moment?

Investors recognize COVID-19 for what it is – an enormous and unprecedented worldwide challenge. Yet global investors continue to view Indonesia favorably. Indonesia has established a good track record with foreign investors, demonstrated financial discipline, and proactively and transparently engages regularly with investors, even more during the pandemic.

In April 2020, Indonesia raised $4.3 billion in three tranches as part of its general budgetary financing activities, including for COVID-19 relief efforts, and earlier in May, quasi-sovereign PT Hutama Karya raised $600 million and the 10-year coupon of 3.75 percent was lower than the sovereign debt coupon of 3.85 percent achieved by the country in April.

How did foreign investors respond to the Indonesian government’s recent global bond issuance to help fight COVID-19?

Global emerging market investors continue to be favorable to Indonesia. Pricing for Indonesia’s recent bonds was attractive across all tranches, which also included the first 50-year issuance for the country and in the Asian emerging market sovereign space. The bond offering was well distributed to global investors across Asia, Europe and the United States.

What do you think of emerging markets, especially Indonesia’s, in terms of asset resilience during the pandemic?

Short term, there will certainly be a slowdown. We don’t expect Indonesia’s growth to be as robust as the last couple of years but we see a fast recovery next year due to the country’s young and large population, and rich natural resources.

As one of the largest traders in primary and secondary markets for rupiah bonds, Deutsche Bank Indonesia sees first hand investor demand for investing in Indonesia. Flows are fairly consistent and Indonesia remains one of the most preferred emerging markets by investors.

What is your view on the Indonesian government’s plan to rescue some state-owned enterprises (SOEs) from default due to the pandemic? Should the government help them to get through the crisis by providing liquidity and preventing a default?

In the short term, some sectors and SOEs will experience challenges and the government is considering what kind of support it can provide to these SOEs. This is not unique to Indonesia, but [it applies] to SOEs around the world.  Restructuring, consolidation and support are understandable given the current situation.

However, what is more important is first supporting healthcare demands and cushioning the overall economic impact of the pandemic. Significantly, the government is instilling financial discipline and accountability into SOEs and we see this as a positive for the medium- and long-term as this will strengthen SOEs governance and professionalism.

How do you think the pandemic will change the way issuers raise funds? Will you be expecting significant changes in road show mechanisms and how do you prepare yourself for change?

Investor meetings and interactions will certainly change, given that travel will be limited for quite some time. This pandemic period has shown that technology is a powerful alternative for corporate to connect with foreign investors for capital markets issuances. Meetings are all conducted virtually with the aid of video conferencing and phones, which can be highly effective as the recent quasi-sovereign issuance we had worked on proved. They engaged with 90 investors in Asia, Europe and the United States over two full days of calls. Notably, this was for a debut issuer in the USD bond market.

We believe that face-to-face meetings will come back when things return to normal, but virtual meetings will become an alternative more and more going forward, especially for investors in non-financial hub locations such as Singapore, Hong Kong, London and New York.

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