Bank Mandiri to be added to MSCI standard indices

Bank Mandiri to be added to MSCI standard indices

Dow Jones, Jakarta

PT Bank Mandiri, Indonesia's largest bank by assets, will be added to the Morgan Stanley Capital International Standard indexes effective July 28.

The move follows the bank's successful initial public offering earlier this month, MSCI said in a statement. MSCI said the market capitalization of Bank Mandiri stock available for investors was above a US$200 million threshold needed for inclusion in the indexes.

Bank Mandiri's addition to the list is likely to further boost sentiment toward the stock. Overseas funds often use MSCI indexes as a benchmark to make investment decisions.

Bank Mandiri sold 4 billion shares, or 20 percent of its total equity, earlier this month, and launched the shares on the local market Monday. The stock is trading Thursday morning at Rp 825 (10 U.S. cents), up 22 percent From an IPO price of Rp 8,675.

Foreign investors accounted for two-thirds of the IPO shares on sale due to growing interest in Indonesia's booming asset markets. Lower interest rates and a stable political environment, have pushed up the stock market, which is up 25 percent since the start of the year.

At the current market price, Bank Mandiri's publicly available stock is worth about $400 million. It's total capitalization, including the government's 80 percent stake, is about $2 billion.

Bank Mandiri is now among the top ten capitalized stocks on the local stock market, and the third largest in the local banking sector after PT Bank Negara Indonesia and PT Bank Central Asia.

Still, analysts caution that risks remain in investing in Bank Mandiri. The government formed the bank after the 1997-98 Asian crisis by merging four state banks. Since then, Bank Mandiri continues to rely on government bonds to shore up its finances, and like many Indonesian banks, is reluctant to make new loans as corporate defaults remain high.