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.