Corporate bond issues to decline next year: SSX

Rendi A. Witular, The Jakarta Post/Jakarta

The Surabaya Stock Exchange (SSX) sees declining corporate bond issues next year as companies started to turn their attention to the surging stock market to raise funds, and on concerns over upward pressure on the domestic interest rate.

The bourse also said there were seven firms that would issue rupiah bonds in the remaining months of this year to finance their business expansions, expected to be worth a total of Rp 1.77 trillion (some US$194 million).

SSX trading and listing director Sugeng Riyadi said corporate bonds issues next year were likely to be below this year's issues estimated at about Rp 16.1 trillion.

"We haven't come out with the exact figure yet for bond issues next year, but we have estimated it will be lower than this year's estimated Rp 16.1 trillion. The decline will be mainly due to the bullish stock market," said Sugeng on Wednesday.

The Jakarta Stock Exchange has soared by more than 25 percent since January, with the Jakarta Composite Index reaching an all- time high of 890.365 on Wednesday.

The vibrant market has been primarily driven by the trouble- free general election, and optimism over the new government under President Susilo Bambang Yudhoyono, which has pledged to stamp out corruption and help create a better business climate.

Analysts also believed the weaker bond issue next year is also attributable to the likely increase in local interest rates amid rising costs of raw materials and higher rates in the U.S.

The higher rates will put a heavier pressure on companies in serving its interest burden on the issued bonds.

Sugeng said between January and October this year, bond issues by companies have amounted to around Rp 14.4 trillion, with seven companies expected to issue some Rp 1.77 trillion in bonds by the end of this year.

"With additional seven issues by the end of this year, we have estimated total bond issues this year will reach about Rp 16.1 trillion, higher than our initial target of Rp 15 trillion," said Sugeng.

However, this year's issues will be lower than last year's total issue of Rp 25 trillion, as some firms have decided to cancel bond plans due to the political risk created by the seven- month election process.

Market capitalization of corporate bonds listed on the SSX totaled more than Rp 56 trillion, with an average daily transaction volume of over Rp 65 billion.

Government bonds still dominate the market with total capitalization of about Rp 400 trillion and average daily transaction volumes of over Rp 2 trillion.

Box

Firms expected to issue bonds this year

Companies Bond size

PT Humpus Intermoda Rp 300 billion Bank Bumiputera Rp 300 billion PT Indofica Rp 500 billion PT Berlina Rp 150 billion Bank Sulawesi Utara Rp 200 billion PT Infoasia Teknologi Rp 125 billion PT Clipan Finance Rp 200 billion

Source: Surabaya Stock Exchange