Wednesday, Sep 30, 2009
(Recasts lead, adds comments from finance minister, background)
By Linda Silaen
Of DOW JONES NEWSWIRES
JAKARTA (Dow Jones)--Indonesia plans to sell up to $1 billion of global sukuk by the second quarter of 2010 to build on the success of its maiden offshore sukuk sale earlier this year.
The government aims to sell more sukuk, both offshore and in the domestic market, as an alternative source of budget funds, Dahlan Siamat, head of Islamic finance at the Finance Ministry, told Dow Jones Newswires Wednesday.
At the offshore sukuk sale in April, investors snapped up $650 million of five-year Islamic paper, which surpassed most analysts' expectations given the challenging economic climate.
Siamat said the government has yet to determine the tenor of the planned offshore deal for next year.
He said Parliament has approved a plan to expand to IDR25 trillion ($2.5 billion) of a pool of assets that may be used to back global and domestic sales of the Islamic bonds this year and in 2010 - around double the previous size of the asset pool.
Earlier Wednesday, Finance Minister Sri Mulyani Indrawati had said the government will be "cautious" in choosing when and how it taps the global market next year, and will look to reduce both the cost and the risks of debt sales.
"As for global bonds in 2010 we must be cautious and anticipatory. There will be quite a large issuance of bonds from various countries, and the potential of rising global inflation," Sri Mulyani Indrawati told reporters after a budget hearing in Parliament.
Indonesia was one of a handful of sovereign borrowers to successfully tap the global market this year. Apart from the offshore sukuk deal in April, it sold $3 billion medium-term notes in February. Southeast Asia's largest economy also sold JPY35 billion yen-denominated Samurai bonds in Japan in July, under a guarantee deal with Japan Bank for International Cooperation.
Finance ministry officials have previously said they expect to sell more medium-term notes and Samurai bonds this year but haven't indicated how large such deals might be.
Regular Domestic Sukuk Auctions Planned
Siamat also reiterated a previous statement from the Finance Ministry that the government will begin regular domestic auctions of sukuk in October. Investors have responded positively to the government's plan to sell the debt on a regular basis, saying they will boost the market's liquidity.
The government fell slightly short of its issuance target in its first-ever domestic sukuk deal last year, selling IDR4.7 trillion ($473 million) of the debt compared with a target of at least IDR5 trillion.
But at its next deal in February this year, investors bought IDR5.56 trillion retail sukuk, far larger than the original plan to sell IDR1.7 trillion of the paper.
Indonesia has traditionally sold sukuk of the Ijarah format, in which returns are generated by lease payments made by the issuer on securitized assets, which are de facto sold to the buyer over the tenor of the debt.
Indonesia backs its sukuk with government property including land and buildings.
-By Linda Silaen, Dow Jones Newswires; 62 21 3983 1277; Reuben.Carder@dowjones.com
(END) Dow Jones Newswires
30-09-09 0857GMT
