Dollar Bond Investors Head to Indonesia

Dollar Bond Sales Exceed $15 Billion This Year... More Than Triple Last Year's Amount

[Asia Economy Jakarta Correspondent Sujin Choi] Investors seeking to purchase dollar-denominated bonds (dollar bonds) are flocking to Indonesia. This is interpreted as a result of the large-scale economic stimulus measures implemented in Indonesia after the COVID-19 pandemic and the simultaneous movement to secure safe assets such as dollar bonds. The scale of dollar bond sales has reached an all-time high.

According to local media including The Jakarta Post on the 19th, the scale of dollar bond sales, including Indonesian government bonds, has exceeded $15 billion so far this year. This is three times larger than the same period last year. In the case of Asahan Aluminium, an Indonesian state-owned mining company, it sold bonds worth $250 million, which is more than six times the amount sold last year.

The boom in dollar bond sales is largely due to the matching of supply and demand. While overseas investors are strongly seeking to secure safe assets such as dollar bonds, Indonesian companies see an opportunity for profit realization. Indonesia’s ample dollar reserves have also encouraged companies to sell bonds.

In January, Indonesia’s dollar reserves reached a record high of $129.2 billion, increasing by $9.2 billion from $120 billion in July last year. As of the end of April, foreign exchange reserves stood at around $128 billion. The Jakarta Post evaluated that "Indonesia’s foreign exchange reserve conditions have acted as a cushion to maintain a stable market environment despite the spread of COVID-19," and Sean Jutakitty, Director of Newberger Berman Asia Corporate Research, said, "We are generally active in Indonesian assets."

The Jakarta Post, citing Bloomberg News, reported that the yield on Indonesia’s dollar securities has recovered 9% since March 23, when the global stock market bottomed out. Arthur Piersacki, portfolio manager at BlackRock, the world’s largest asset management company, stated that he would not undervalue Indonesia’s dollar funds.

Sales of dollar bonds by state-owned enterprises are expected to continue. Eric Thohir, Indonesia’s Minister of State-Owned Enterprises, mentioned that several companies are preparing to sell dollar bonds. Indonesia’s Lampung Bank plans to sell $1 billion worth of bonds in the third quarter.

However, there are also voices of concern. Nicolas Yep, an analyst at Nomura Holdings, warned that Indonesian state-owned enterprises should avoid touching foreign currency bonds as long as they have the ability to repay the bonds. This means caution is needed regarding bond sales considering Indonesia’s uncertain fiscal outlook. Indonesia has maintained a fiscal deficit limit of 3% since 2003, but this limit has been lifted due to the spread of COVID-19. Last month, S&P downgraded Indonesia’s credit rating to BBB.

This content was produced with the assistance of AI translation services.