REPUBLIKA.CO.ID, JAKARTA - Indonesian companies lining up to sell at least 4 billion USD in bonds said on Thursday they were unperturbed by a surprising parliamentary election that dented the country's status as an emerging market favorite.
The southeast Asian nation's financial markets had rallied this year on prospects of Jakarta Governor Joko Widodo, known as "Jokowi", becoming president with a strong enough mandate to push through long-stalled reforms.
Foreign inflows into Indonesian government bonds hit 3.9 billion USD in the year to date, compared with 4.7 billion USD for all of 2013. Since May 2013, the country has recorded only three months when there was more foreign money leaving than arriving.
The premium that investors demanded to hold Indonesian 10-year bonds over the benchmark 10-year US Treasuries has narrowed by 839 basis points, or 28 percent, since the end of January as anticipation of Jokowi's candidacy boosted reform hopes.
But early returns from Wednesday's parliamentary election showed that Jokowi's Indonesian Democratic Party for Struggle (PDIP) will have to cut a deal with other parties in order to nominate its hugely popular candidate for president in a July 9 poll.
"There will be a tempering of reform expectations for the moment from the investors' perspective," said Philip McNicholas, BNP Paribas Hong Kong based ASEAN analyst.
The notion that Jokowi will need to form a coalition to win power does not necessarily mean that his government would have to compromise on reform, according to some executives eyeing debt issues.
Indonesian state-owned gas utility firm PT Perusahaan Gas Negara, which plans to issue 1.5 billion USD worth of global bonds this year mainly to fund its expansion, saw the bright side of a coalition government.
"This is actually positive because the opposition will be reduced and this will be good for government policies," Corporate Secretary Heri Yusup told Reuters. "Investors are still likely to respond positively to Indonesia because the election is going on safely and our economic condition is also conducive."
Other firms are also lining up issues. State energy firm Pertamina plans to issue bonds worth 2.5 billion USD to 3 billion USD as early as next month, two sources with direct knowledge of the matter told Reuters.
Pertamina Director Muhammad Husein did not confirm the amount or timetable, but said investor response to a road show last week was "positive" and the election result was little cause for concern.
Berau Coal Energy has picked Citigroup and Standard Chartered for a bond issue of undetermined size. Textile firm Sri Rejeki Isman plans to issue 300 million USD bonds next month, Director Iwan Lukminto said.
Property developer Lippo Karawaci, which issued 150 million USD in 8-year global senior notes offering 7 percent returns, said its order book was 6.3 times over-subscribed.
Ignatius Girendroheru, president of the Indonesian Bond Pricing Agency, which provides bond pricing information, attributed the heavy issuance pipeline to corporate expectation that the rupiah currency will strengthen at the end of the year. But he cautioned that companies have to be wary of pricing as US interest rates may rise in 2015.
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