Islamic finance is gaining prominence as a channel for China to expand its economic influence abroad. (ID Photo/David Gita Roza)

Indonesia to Bump Up Retail Bond Sales Volume in 2019


JANUARY 10, 2019

Jakarta. Indonesia aims to nearly double its retail bond sales volume this year from 2018 levels, hoping to attract more millennial investors through online sales and reduce its dependence on foreign funds, an official at the Ministry of Finance said on Thursday.

The government plans to sell retail debt papers worth as much as Rp 80 trillion ($5.7 billion) in 10 planned issuances this year, Loto Srinaita Ginting, director of government securities at the ministry, told reporters during the first day of sale of savings bonds.

The government raised Rp 46 trillion from five retail bond issuances last year.

High foreign bond ownership has made Southeast Asia's largest economy vulnerable to sudden capital outflows, sometimes triggered by global events outside the country's control.

Sell-offs in Indonesian bond and equity markets last year due to rising US interest rates, the US-China trade war, and its own ballooning current-account deficit, sent the rupiah to its lowest since the 1998 Asian financial crisis.

Foreign investors currently hold around 37 percent of Indonesia's high-yielding sovereign bonds, while local individual investors own less than 5 percent, according to finance ministry data.

This year, the government will be flexible in its budget financing strategy, given changes in market predictions on the number of times the US Federal Reserve could possibly hike interest rates, Loto said.

The government could reduce the volume of dollar-denominated bond issues if market pressure increases again and might shift to more retail bond sales or multilateral loans, she said.

"So in this time of uncertainty, bond issuance strategy becomes more flexible," Loto said.

The government plans to sell bonds worth a total of Rp 825 trillion this year, including short-term treasury bills and buybacks, to fund an estimated fiscal deficit of 1.84 percent of gross domestic product.