Second retail sukuk sell like hot cakes, bids reach Rp 8.03t

Retail Islamic bonds sold like hot cakes, with bids reaching Rp 8.03 trillion (US$851 million), almost tripling initial targets of Rp 3 trillion, when the high-yield bonds were introduced onto the market on Monday.

The Finance Ministry’s director general of debt management, Rahmat Waluyanto, said the ministry would introduce a maximum limit on the purchase of retail sukuk after an investor placed an order worth Rp 25 billion in the bond coded SR-002, which is designated to individual investors.

“We have not yet decided the limit,” said Rahmat, adding the ministry would use the Rp 3 billion limit placed on the retail bonds as a benchmark.

Rahmat said that the investor who bought Rp 25 billion in retail sukuk might shift funds from the currently-shaky stock market.

The ministry wants to develop domestic investors in the bond market to help strengthen the government’s bonds against volatility resulting from the movement made by foreign investors.

The second retail sukuk, designated for retail investors, received a total order of Rp 8.75 trillion, the ministry said. The sukuk offer 8.7 percent yield, maturing in 2013.

The first retail sukuk issued in February last year were also a hit, absorbing a total order of Rp 5.56 trillion, about three times its initial target of Rp 1.77 trillion.

Rahmat said the government still has an option to sell Islamic bonds worth about Rp 17 trillion to help finance the state budget.

He did not mention when the government would conduct the next sale of retail sukuk, but saying that the global sukuk would be launch early in the second half this year to cope with the budget deficit.

“It will be before Ramadan,” he said.

Last month the government sold $US2 billion worth of 10-year dollar-denominated bonds.

Rahmat said the government would also issue yen-denominated samurai bonds sometime in the first half this year to help plug the 2010 budget deficit of Rp 98 trillion.

The ministry also has sukuk sale via auction conducted once a month, said director of sharia financing policy Dahlan Siamat.

Recent upgrades in Indonesia’s ratings by international agencies have attracted foreign capital inflows. Last month Fitch Ratings upgraded Indonesia’s ratings from BB to BB+, one level below investment grade, citing the country’s resilience to the global financial crisis.

Yesterday’s sale of retail sukuk attracted 17,231 investors, more than the 14,295 investors purchasing the first retail sukuk.

Investors with an age from 41 to 55 years old -- comprising 40.79 percent of total investors -- bought the most retail sukuk, of 35.32 percent of the total volume of Rp 8.03 trillion.

The Finance Ministry also picked the best three selling agents: Bank Mandiri, Bank Negara Indonesia and Bahana Securities to sell the retail sukuk.

Indonesia, the world most-populous Muslim nation, is tapping individual investors after it was forced to scale back an overseas debt sale as it seeks to alleviate its budget deficit.

Sales of sukuk may increase 24 percent to $25 billion this year, led by Southeast Asia, CIMB Group Holdings Bhd., the leading broker of such issuances, said last week.

“Demand is strong because the government is paying a bit of an extra yield from what you can get in the secondary market,” said Suryandy Jahja, managing director at PT Kresna Graha Sekurindo in Jakarta.

“Sukuk are special products that appeal to a lot of retail investors in this country and there’s a lot of untapped cash in the system,” he was quoted as saying by Bloomberg.

Indonesia has projected a budget deficit of Rp 98 trillion this year, equivalent to about 1.6 percent of gross domestic product. The shortfall was Rp 87.2 trillion in 2009, according to the Finance Ministry.