HSBC launches Indonesian domestic bond index

Urip Hudiono, The Jakarta Post, Jakarta

The Hong Kong and Shanghai Banking Corporation Limited (HSBC) has made information on Indonesia's domestic bond market available to investors worldwide by including the market's index in its Asian Local Bond Index (ALBI) on Thursday.

"We hope the index will be useful for investors in monitoring the market and as a benchmark for their portfolios," said HSBC Indonesia's director of sales and debt markets, Radianto Kusumo.

The newly launched Indonesian bond index currently lists the performance of 20 domestic bonds series issued by the government in the rupiah currency, with a minimum volume of Rp 21 billion (US$ 2.47 million) and a minimum maturity of one year, in reference to a December 2000 basis.

Besides listing the bonds' daily performance, the index also includes HSBC's analysis of the bonds, such as their average yield, average duration and total return.

The index, which HSBC claims to be the first of its kind in Indonesia, will, however, not include any information on corporate bonds yet.

Radianto explained that HSBC decided to include Indonesia's domestic bond market in its ALBI since it had noticed a significant increase in the market's liquidity and volume over the past six months, including a total investment of up to Rp 8 trillion from global investors.

With a ratio between its bond yield and currency volatility of 1.05, Indonesia is also seen by HSBC as the third most promising bond market in the Asian region, after India and the Philippines, which has a ratio of 3.64 and 1.38, respectively.

HSBC's ALBI, which can be accessed through Bloomberg's business wire service by typing in the keyword "HSLI", has previously listed the bond indexes of only eight other Asian countries, including India, the Philippines, and Hong Kong.

Commenting on the government's recent plan to regularly issue domestic bonds each month, Radianto said that he agreed to such a policy.

"Besides being timely, the decision to regularly issue limited volumes of bonds will also keep their yield stable," he said, adding that the eight-year bonds were ideal for pension fund managers.

The government has twice issued domestic bonds this year. The first, in February, was worth Rp 2.52 trillion and was oversubscribed 2.14 times. The latest, last Tuesday, was worth Rp 2 trillion and was oversubscribed 2.84 times. The government plans to issue a total of Rp 28 trillion in domestic bonds this year.