Investment in bonds may reach Rp 17t: Danareksa

Investment in bonds may reach Rp 17t: Danareksa

The Jakarta Post, Bogor

State-owned investment bank PT Danareksa estimated that the size of investment in local corporate bonds this year would reach up to Rp 17 trillion (US$1.91 billion), lower than the Rp 21.5 trillion of last year.

Danareksa executive director Desimon said that although investors remained interested in placing their money in corporate bonds amid declining interest rates, most investors would focus on bonds issued by bluechip companies.

"Investors are still interested in bonds as a better investment alternative amid a declining trend in interest rates," he said over the weekend.

"But by the end of 2003 the market probably will only absorb between Rp 15 trillion and Rp 17 trillion, lower than the volume in 2002 because investors are tending to look for bluechip (bonds)."

Desimon said that for the first semester of this year, there would be around Rp 11 trillion worth of bonds issued by 23 companies.

Another 10 companies are planning to make bond issues in the second part of the year, with the last batch expected to be completed in October before the start of the holidays of Ramadhan and Christmas.

Companies have been increasingly aggressive in raising cash through bond issues over the past year, taking advantage of investors looking for higher returns amid declining interest rates both at home and overseas.

The current rapid appreciation of the rupiah relative to the U.S. dollar is partly due to the inflow of overseas money invested in local corporate bonds.

Issuing bonds is also seen as a cheaper method of raising money both for working capital and repaying maturing debts. In the last five years, companies have had difficulties obtaining loans from banks which have yet to fully recover from the late 1990s financial crisis.

But Desimon said that despite the current boom, there were still a number of problems faced by the corporate issuers.

One example is the lengthier period required to process one issue, which could take up to three months, while in other countries it only takes between two and four weeks.

Another is the fact that the bond market is still dominated by institutional investors like pension funds and insurance companies.