Investment in sharia bonds expected to surge
Investment in sharia bonds expected to surge
The Jakarta Post, Jakarta
Investment in the form of Islamic syariah bonds in the country is
forecasted to grow robustly to around Rp 1.27 trillion (about
US$144 million) this year from Rp 130 billion last year, a
consultant specializing in the sector said.
Analyst Adiwarman A. Karim from Karim Business Consulting said
that syariah bonds were an attractive investment alternative as
they offered high returns with a coupon rate averaging 16 percent
compared to the 14 percent to 16 percent offered by conventional
bonds.
"With such a sweetener, the market will react positively to
this form of investment," Adiwarman told reporters on Monday.
Investment in the form of syariah means that investments have
to be carried out according to Islamic law, which bans, among
other things, the receipt of interest from loans.
Adiwarman explained that a high growth was possible as
investors were basically running out of other investment options
amid the overall unfavorable investment climate here.
The country's equity market is losing its attraction given the
prevailing bearish sentiment, he said.
Moreover, investors are also reluctant to invest in the real
sector given the prevailing high risk and weak economic growth.
Investing in bank deposits is not so attractive either amid
declining interest rates as Bank Indonesia has been steadily
lowering its benchmark interest rate since early last year.
The benchmark interest rate on Bank Indonesia one-month
promissory notes is currently 11.39 percent, from over 17 percent
at the beginning of last year.
Karim hinted that in the third quarter of this year, three
giant companies engaged in financing, transportation and food
processing were expected to issue syariah bonds that could be
worth at least Rp 700 billion.
Two companies have already issued syariah bonds this year,
namely telecommunications firm PT Indosat (Rp 175 billion) and
shipping firm PT Berlian Laju Tanker (Rp 100 billion).
Investment in syariah bonds is still in its infancy, but
market players predict that it will soon emerge as an important
investment option as most Islamic countries had adopted this
investment form, particularly Malaysia whose bond portfolio is
dominated by syariah bonds rather than conventional bonds.