The Jakarta Post
The popularity of global bonds issued by the Indonesian government and corporations has spiked as both investors and issuers seek to limit foreign currency risks and improve liquidity amid market uncertainty, according to securities company Mandiri Sekuritas.
Mandiri Sekuritas, a subsidiary of state-owned Bank Mandiri, has seen its revenue from the global bonds business increase 41 percent year-on-year (yoy) in the first half as the government was actively issuing US dollars bonds.
“Investors consider Indonesia’s dollar-denominated bonds as premium ones,” Mandiri Sekuritas president director Dannif Danusaputro said during a press conference on Thursday.
The government has issued Rp 630.5 trillion (US$43.1 billion) worth of sovereign debt papers (SBN) as of the end of June, including $4.3 billion from a three-tranche US dollar-denominated bond in April and $2.5 billion from a three-tranche global sukuk (sharia-compliant bond) last month, according to the Finance Ministry.
The government also raised 100 billion yen ($930 million) from the issuance of five-tranche samurai bonds earlier this month.
The vast amount of debt papers were issued by the government to cover its budget deficit of 6.34 percent of the gross domestic product this year as Rp 695.2 trillion has been allocated to bolstering the economy and strengthening the healthcare system amid the COVID-19 pandemic.
Mandiri Sekuritas operation director Heru Handayanto said investors at the time had a big appetite for greenback-denominated bonds, as they tried to avoid risk exposure, including foreign currency ones.
“From the supply sides, the issuers list their bonds abroad, such as in Singapore and London, as their revenues are in US dollar, so they’re seeking debt in the same currency. It’s also cheaper in terms of the coupon rate because they can avoid currency risk exposure,” he said during the press conference.
Furthermore, Heru said, global corporate bonds were more liquid than rupiah-denominated debt papers, making the former a favorite for investors during market uncertainty.
Besides the government, state-owned enterprises and private corporations are also turning to the global market to raise funds as banks are now more prudent in channeling loans, and the stock market is volatile amid cooling economic activity.
Bank Mandiri, for instance, has successfully launched its $500 million global bonds as demand from foreign investors, mostly from Asia and Europe, far exceeded the amount it offered.
The debt paper was oversubscribed by almost five times with demand reaching more than $2.4 billion, the bank said in a statement on May 6.
Meanwhile, Mandiri Sekuritas reported total revenue of Rp 288 billion in the first half, 8 percent of which was generated by its Singaporean subsidiary Mandiri Securities Pte. Ltd., which provides global bond issuance services.
The Singapore-based subsidiary booked 12 global bond issuances worth around $2.1 billion in the first half of the year, a 109 percent annual increase.
While revenue from the global bond services have seen a significant growth, the largest revenue share for Mandiri Sekuritas comes from capital market investment by both institutional and retail investors, which contributed to 42 percent and 30 percent, respectively, to the company’s revenue.
The company’s retail director, Theodora Manik, said Mandiri Sekuritas’ retail clients had added by 26,000 investors in the first half of the year. Mandiri Sekuritas currently has 145,000 retail clients, a 35 percent yoy increase.
“Retail investors currently have become more educated and have a deeper understanding of the market. We’re optimistic that the retail investor market will continue to grow,” she said.
Retail investors now dominate stock trading in Indonesia, accounting for 52 percent of the trading value in June.
Indonesia Stock Exchange (IDX) development director Hasan Fawzi has noted that the percentage of retail investors’ trading value would be even bigger if their indirect transactions through mutual funds were considered. The figure indicates significant growth in retail investors' participation in the stock market, he added.
According to data from the Indonesian Central Securities Depository (KSEI), the number of investors aged 18 to 25 grew by 338.61 percent from 2016 to May 2020. Meanwhile, the number of investors aged 26 to 30 grew by 204.97 percent during the same period.