Indonesia Macro Files: A Ticket To Make God (May) Smile

INDONESIA's government plans to sell sukuk retail on Feb 23 as an effort to help covering budget deficit this year which estimated at 1.8 percent of its gross domestic product or around Rp 124.7 trillion.

INDONESIA's government plans to sell sukuk retail on Feb 23 as an effort to help covering budget deficit this year which estimated at 1.8 percent of its gross domestic product or around Rp 124.7 trillion.

This sharia compliant bond- coded SR 003- will offer its holders lucrative profit sharing as there is no interest rate bearing in Islam. However, it positively has higher yield compared to gain resulting from conventional banking term deposits and even with its peer on conventional bond, a 3 year treasury bond government has sold which bringing 7.83 percent interest. On this third issuance, coupon sets at 8.15 percent, lower than that of last year's figure which established at 8.7 percent.

Government has picked up 20 selling agents with those are 11 banks and 9 securities including Bank Mandiri, Bank Internasional Indonesia, Bank Rakyat Indonesia, Bank CIMB Niaga, Trimegah Securities, HSBC, Bank Negara Indonesia, Citibank NA, Standard Chartered Bank, Bank Permata, Bank OCBC NISP, Andalan Artha Advisindo Sekuritas, Mega Capital Indonesia, Bahana Securities, Sucorinvest Central Gani, Reliance Securities, Ciptadana Securities and Kresna Graha Sekurindo Tbk. Their main responsibility each is collecting orders from retail investors and reporting the result to the finance ministry.

Expanding domestic investors participation and deepening local financial market, government requires only the country's citizens are entitled to buy sukuk retail.

Investors may book their order at one of the selling agents between Feb 7 to Feb 18 with minimum order Rp 5 million and are allowed to buy its fold without any limitation amount. They will purchase at par in primary market and pay taxing 15 percent final.

'I am sure, the demand will be strong as the yield is around 200 basis points above interest of banking term deposits,' said other official. However, he refused to disclose the size of the SR 003 issuance- how much the bond will be sold-, adding that this portfolio is no default risk and tradeable in secondary market.

Indonesia is one of the top ranks emerging markets which continues experiencing massive inflows of so-called hot money from overseas investors. Putting money in such market considered more profitable as they offer higher return than that in advanced countries as interest rate there are commonly close to zero following sluggish recovery in their economy. Besides, Indonesia also expects reaching an investment grade later this year or early next year.

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Well, sounds pretty interesting and irresistible for me as I am trying to shift mindset from saving to investing. Should I have considerable resource, I would not be in doubts being on a queue buying the bond. Where money shall be placed except in the safest area? And it is pretty clear that such a place is nowhere but in government bonds. Abso-very-lutely, isn't it?

Having read this post, what finally comes to your senses. Do you find yourself slavering like me?

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Tags: economy, indonesia, retail Islamic bond


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