Bank Mandiri shares offering helps support local currency

Dadan Wijaksana, The Jakarta Post, Jakarta

The rupiah hit 8,200 early on Thursday on capital inflows linked to Bank Mandiri's initial public offering (IPO), although dollar buying from importers and firms paying maturing foreign debts strained the unit's progress to close at 8,222 per dollar.

"In early trading, there was strong demand for rupiah, most likely from foreigners converting their funds to purchase local assets, notably the shares in Mandiri.

"But, after the rupiah reached 8,200, companies then rushed in buying dollars for both imports and debts payments," a dealer at local brokerage said.

Nevertheless, the closing marked the rupiah's rise for the fourth consecutive day, which dealers credited to foreign investors' high demands for local assets currently on offer, notably the shares of Mandiri.

The government is putting on the table 20 percent of Mandiri's stake, with Friday the last day of the share offering which started on Wednesday.

The dealer said the upward movement of the rupiah in recent days should confirm high demands for Mandiri -- the largest bank in the country.

A researcher from a state-owned bank agreed, saying that a relatively quiet day seen on the first day of the offering did not represent the actual demand.

"From what I've heard, demands for the IPO are actually good, especially from institutions both local and foreign," he said, without mentioning the names of the institutions.

On Wednesday, the offering's first day, only a few walk-in investors were seen at the office at Bapindo Plaza complex, where Mandiri opened its only registration counter in Jakarta. The other counter for walk-in investors is in Surabaya.

Some people speculated that the IPO had failed to attract investors.

"There might be just a few people coming to the counter, but they are all retail investors, rather than those representing institutions, which I think will prove to become the main buyers," he added.

Rumors circulating around the market say big companies, both local and from overseas, have set their sights on a large volume of Mandiri's shares.

For instance, state-owned insurance company PT Jamsostek was said to have plans to purchase some 300 million shares, but the firm could not be contacted for confirmation.

The government initially planned to sell a 15 percent stake in the bank, but later raised the stake offer to 20 percent citing the strong demand from investors. The government said the shares were 6.5 times oversubscribed.

There are some 4 billion Mandiri shares on offer with the price set at 675 per share.

Some analysts have said Mandiri's IPO could push the rupiah to above 8,000 against the U.S. dollar, as investors buy the currency for the purchase of the shares.

Aside from Mandiri, foreign investors were also eying other local assets expected to be on sale soon, including Bank Danamon and Bank Niaga, dealers said.

The Indonesian Bank Restructuring Agency (IBRA) has said that it would kick off the sale of another 20 percent stake in Danamon and another 19 percent stake in Niaga.