BNIS Fixed Income Daily Report of October 11, 2019.
Bond Market Review (Thu, 10/10)
Another sideways movement took place on Indonesia’s bond market yesterday along with the mixed external catalysts. Most maturities along the government yield curve were little changed, in which, the 10-year Government bond yield was relatively unchanged at 7.25%. The IDR weakened slightly to IDR14,150/USD yesterday, compared to the previous day’s closing level of IDR14,173/USD.
The sideways market movement was underpinned by lower investors’ activities, in which the outright trading volume of Government securities only reached IDR7.8 trillion yesterday, lower than the year-to-date average daily trading volume of IDR13.9 trillion. Meanwhile, the month-to-date average daily trading volume was only recorded at IDR11.0 trillion. FR0078 and FR0077 were the two most actively-traded series in secondary market, with the trading volume of IDR1.5 trillion and IDR1.1 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.2 trillion yesterday.
Bond Market Preview (Fri, 11/10)
Indonesia’s bond prices are expected to strengthen slightly on the final trading day of this week. The global market pressure eased amid increasing optimism on US – China trade talks. The US President, Donald Trump, said that he will meet Chinese Vice Premier Liu He on Friday. Meanwhile, the China’s Vice Premier also said that China came into the negotiations with great sincerity and a willingness to cooperate with the US on some issues such as trade balance and market access. Bloomberg News reported that the US was considering an agreement to suspend next week’s import tariff increase. Meanwhile, The New York Times also reported that the Trump administration is grant licenses for some US companies to sell no sensitive supplies to Huawei. Those sentiments were responded positively by global market participants, spurring investors’ risk-appetite and reducing demand on the safe-haven assets, which can be spotted from the strengthening US stock market last night (Dow Jones +0.57%; S&P 500 +0.64%; Nasdaq +0.60%), which was followed by increasing the 2-year, 10-year, and 30-year yield to 1.54% (+7 bps), 1.67% (+8 bps), and 2.16% (+7 bps). The increasing global optimism may also add the positive catalyst which will open a room for Indonesia’s bond market strengthening on this week’s final trading day. However, the possibility of significant market strengthening may be curbed by the likelihood of less aggressive stance from investors amid higher global volatility and uncertainty.
Along with the potential of market strengthening in near term, then, several Government bonds such as FR0081, FR0082, FR0080, and FR0079 may become a more attractive choice for investors.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the rating of idAA- for PT Chandra Asri Petrochemical Tbk (TPIA), the company’s bond I 2016, Shelf Registration Bond I TPIA 2017 – 2018, and Shelf Registration Bond II 2018 – 2019. The outlook for the corporate rating is stable. Regarding the company’s bond I 2016 series A worth of IDR361.4 trillion which will mature on December 22, 2019, it plans to repay the bonds using its cash on hand. As of June 30, 2019, the company had a cash balance of USD649 million. According to PEFINDO, the rating reflects the agency’s view of the TPIA’s leading position in the domestic petrochemical industry which is supported by synergies with its strategic partners, vertically integrated operations with satisfactory supporting facilities, as well as conservative capital structure and strong cash flow protection measures. However, the rating is still constrained by its sensitivity to industry cyclicality and exposure to the volatility of spread between feedstock cost and product prices, as well as risk related to the expansion of petrochemical facilities.
PT Waskita Beton Precast Tbk will issue Shelf Registration Bond I Waskita Beton Precast Phase II 2019 at the maximum size of IDR1.5 trillion. As much as IDR1.32 trillion will be sold im the form of 3-year paper, and offering a coupon of 9.75% per annum. Meanwhile, the remaining IDR175.8 billion will be sold with best effort scheme. This bond issuance is part of Shelf Registration Bond I, with total issuance target of IDR2.0 trillion. Fitch Rating Indonesia has affirmed the rating of BBB+(idn) for the company’s bonds. The proceeds from this bond issuance will be used for company’s working capital in construction and civil building works, including purchasing construction materials, subcontractor fees and labor costs, and bank loans re-profiling. The public offering period will be conducted on October 24-45, 2019. Meanwhile the bonds will be electronically distributed and listed in IDX on October 30 and 31, 2019, respectively.