Investors cold shoulder launch of treasury bonds on SSX

JAKARTA (JP): No transactions have been made of the treasury bonds launched on the Surabaya Stock Exchange (SSX) early this month, an exchange executive said on Wednesday.

SSX president Anton Natakoesoemah said most investors still considered the bonds unattractive for profit taking.

"Although several investors showed interest, their bids were far below the face value of the bonds," he said.

Securities companies including Peregrine Sewu Securities, Vickers Ballas Tamara and Indovest Securities have entered the auction. But no single bond has so far changed hands because banks, technically the owners of the bonds, would not accept their low bidding prices.

Most of the bidders wanted to buy at maximally 85 percent of the face value while the owners wanted to release them at par, Anton said.

Bank Indonesia, starting on Feb. 2, allowed 12 local banks to trade the treasury bonds issued by the government last year to finance their recapitalization costs.

They are Bank Lippo, Bank Central Asia, Bank Danamon, Bank Universal, Bank Artamedia, Bank Tiara, Bank Mandiri, Bank Bukopin and four provincial administration-owned banks of East Java, Aceh, North Sulawesi and Lampung.

The bonds to be traded include five-year bonds with a fixed rate of 12 percent, and variable rate bonds maturing in 2002, 2003 and 2004.

The rate of the bonds maturing in 2002 is 11.40 percent, and 13.04 percent for those maturing in 2003 and 2004, the central bank said in a statement.

The fixed income trading manager at SSX, Erna Dewayani, said on Wednesday that the total value of the bids placed by the investors since the initial listing early this month reached a total of Rp 33 billion.

"Last week we had bids coming in almost every day at between 80 percent and 86.5 percent of the face value. But this week we have seen no bids at all," she said.

She said investors appeared to be more interested in the fixed rate bonds than floating rate ones.

"Practically all the bids were on the five-year maturity bonds whose interest rates are fixed at 12 percent per annum."

A dealer at Indovest Securities said that his clients were interested in the fixed-rate bonds because they predicted a downward trend in the long-term interest rate, and secondly because the benchmark used by the floating rate bonds was still low.

Speaking on the condition of anonymity, he said that investors would like to buy the bonds at a discount so they could gain an effective yield higher than the coupon rate.

"The 12-percent-per-annum fixed rate bonds were attractive enough but the rate was still seen as a little too low. That's why investors placed their bids under par," he said, comparing them to the 17 percent per annum fixed rate offered by the higher risk corporate bonds.

"But we also understand that those recapitalized banks could not sell at a discount because by doing so they would have to book a loss, thus affecting their already tight equity balance."

Anton said the government should enhance its support of the treasury bond trading.

He said the efforts should include finding a "market maker" to kick start the bond trading until it found its own market liquidity.

"In the meantime, we will do our best to facilitate the bond trading while further promoting debt instruments, bonds, as an alternative investment," he said.

Separately, Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday the government would revise the structure of its bank recapitalization bonds if they received a poor response in the secondary market.

"The government will have to revise (the bonds) if the market demand is poor," Kwik said on the sidelines of a business gathering.

"The government has to be creative."

He added that there were many options to be considered, including extending the maturity of the bonds or limiting the size of the secondary market issue.

"We have to admit that it was difficult to predict what the market's response would be when we decided to launch 10 percent of the bonds into the (secondary) market," Kwik said.

The government has so far issued Rp 282 trillion worth of bonds to finance the recapitalization of the country's ailing banks. The total recapitalization cost is expected to reach Rp 392 trillion.

For the first phase, the banks will be allowed to trade about Rp 2.6 trillion worth of bonds, or about 10 percent of the bonds issued to finance their recapitalization costs. (rei/udi)