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Corporate bond default risk remains high this year
Analysts say the perception of heightened risk may push up corporate bond yields in Indonesia. At some point, the situation could spell doom for companies that require financing to stay afloat.
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A Muamalat Bank employee uses his smartphone at work at the Muamalat Tower in Jakarta on Sept. 22. The Finance Ministry predicts that the economy will contract between 0.6 and 1.7 percent this year. JP/Seto Wardhana. (JP/Seto Wardhana)
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ndonesian companies remain at an elevated risk of defaulting on bond payments in 2021, a fact that has caused concern among investors.
Analysts say this concern could push corporate bond yields up, reflecting investors’ perception of heightened risk. At some point, the situation could spell doom for companies that require financing to stay afloat.
Companies with good credit ratings have a better chance of convincing investors to buy their bonds, despite macroeconomic risks, while companies that struggled last year will have to fight hard to win back the market’s confidence.
Bonds have been crucial in keeping companies alive, especially those that are facing liquidity problems but still have the potential to get back on their feet after the economic crisis ends.
Debt rating agency Pemeringkat Efek Indonesia (Pefindo) analyst Fikri C. Permana said the concerns arose from the high number of defaults in 2020 and the possibility of a repeat in 2021.
“Several issuers that defaulted in 2020 have caused fear among investors. The fear is still here,” Fikri told The Jakarta Post on Monday.
The economy has not returned to its pre-pandemic condition, despite the government’s economic recovery program, and investors remain cautious about buying Indonesian assets.
