200 RI firms to tap offshore debt market
200 RI firms to tap offshore debt market
JAKARTA (JP): Approximately 200 Indonesian companies will, for the first time, raise funds from offshore debt markets this year, according to Peregrine Fixed Income Limited (PFIL) of Hong Kong.
An analyst at PFIL, Jaideep Krishna, said at the launching of the company's Asian Credit Research: 1995 in Review here yesterday that Indonesian companies will enjoy a longer tenure of debt instrument maturity, more favorable pricing and liquidity due to improving confidence of international investors.
The Review said that about 250 Indonesian companies and financial institutions raised foreign currency loans last year, taking the cumulative total borrowings from offshore markets to more than US$20 billion as of last year.
"It was a sharp increase as compared to 150 companies in 1994 and about 100 in 1993. It also reflected foreign investors' improving confidence in Indonesia," said another analyst, Gray.
"PFIL sees Indonesia as a country with great potential. As the economy grows strongly, PFIL believes that Indonesia cannot only depend on the loan and equity market, but will soon have to tap both domestic and international debt markets," Timothy said.
The Review noted the upgrade of investment ratings, the government's ongoing liberalization measures and a robust growth of foreign direct investment as the key factors which have strengthened foreign investor confidence in the Indonesia economy.
The American credit rating company Standard and Poor's raised Indonesia's rating from BBB- in 1994 to BBB last year.
The May 1995 deregulation package which cut tariffs on more than 6,000 items, or about 64 percent of all items, shows the government's commitment to boost the country's global competitiveness.
"International competitiveness is one of the criteria that we used to assess an issuer's capability to service its debt," Gray said.
"It's worth noting that foreign direct investment is driving and financing the current account deficit. Therefore the implications of a weaker currency and larger external debt do not apply in the case of Indonesia," the Review said.
Jaideep said that PFIL's research team has also estimated a positive outlook for the Indonesian companies in the sectors of cement, automobiles, retail and infrastructure; a stable outlook for plywood, pulp and paper and textiles; and s negative outlook for the property sector.
He said that cement producers will maintain their strong earnings growth due to the current undersupply situation.
And an oversupply of apartments and rental offices as well as high interest rates will cause negative growth for many property companies.
Pulp and paper companies, according to PFIL, are estimated to see a decline in profits due to a continuing drop in pulp prices in the world market.
"But the main advantage for Indonesian pulp and paper producers is that certain trees used for pulp and paper raw materials take only five to seven years to grow in Indonesia compared to about 30 years in other countries," he said.
Moreover, Indonesia's proximity to regional markets which are net importers of pulp gives a freight advantage of about US$30 to $50, or about 5 percent of the selling price, per ton.
He added the Indonesian pulp and paper industries also enjoy low production costs.
"It means that to some extent the price drop may have caused foreign companies losses but not Indonesian companies. That's why we anticipate a stable outlook for the sector," he argued.
The Review, which focuses on evaluating the ability of companies and financial institutions to service their debt obligation, is divided into two volumes.
The first volume contains reports on Indonesian companies, including 45 large ones such as PT Astra International, PT Citra Marga Nusapala Persadha, PT Indah Kiat Pulp and Paper, PT Semen Cibinong and seven state-owned banks.
The second volume covers Hong Kong, Malaysia and Thailand.
PFIL has been active in the Indonesian fixed income market for three years, both in the corporate and financial institution sectors.
It has assisted a number of Indonesian companies in raising debt financing including PT CMNP, PT Mulialand, Bank Internasional Indonesia, PT Indah Kiat Pulp and Paper, PT Bank Negara Indonesia, and PT Bank Ekspor Impor Indonesia. (08)