BNIS Fixed Income Daily Report of December 4, 2019.
Bond Market Review (Tue, 3/12)
Indonesia’s bond prices moved sideways yesterday amid increasing global uncertainties. The government bond yield movements were mixed ranging between 1 – 4 bps along the curve, in which, the 10-year Government bond yield rose 2 bps to 7.14%. The IDR strengthened to IDR14,115/USD yesterday, compared to the previous day’s closing level of IDR14,125 /USD.
The outright trading volume of Government securities was recorded at IDR12.7 trillion yesterday, increasing from Monday’s trading volume of IDR9.3 trillion, but still lower than year-to-date average daily trading volume of IDR13.8 trillion. FR0077 and FR0078 were two most actively-traded series in secondary market yesterday, with the trading volume of IDR4.8 trillion and IDR1.5 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Wed, 4/12)
Indonesia’s bond prices are expected to decline in near term amid higher external pressure. The global market pressure increased as the US still plans on moving ahead with scheduled December 15 import tariffs on Chinese goods. Meanwhile, the US President, Donald Trump, said that he has no deadline for a trade deal and does not mind waiting until after the 2020 election to make deal. Increasing investors’ fears on the worsening US – China trade tension spurred the market participants to stay away from riskier assets and increasing demand on the safe-haven assets, which can be spotted from the weakening US stock market last night (Dow Jones -1,01%; S&P 500 -0,66%; Nasdaq -0,55%), which was also followed by increasing US Treasury bond prices. The US Government bond yields slumped last night, in which the 2-year, 10-year, and 30-year yields were closed at 1.54% (-6 bps), 1.72% (-10 bps), and 2.17% (-10 bps), respectively. Those sentiments may also affect Indonesia’s bond market, opening a room for market correction in near term. However, on the flip side, the likelihood of significant decline on Indonesia’s bond prices may be curbed by solid Indonesia economy with subdued inflation and stable IDR movement.
As the room for market correction is still relatively open in near term, then, the short-end and the belly series of Government bonds such as FR0061, FR0063, FR0070, FR0077, FR0064, and FR0071 may become a more attractive choice for investors.
Indonesia Bond Market News
PEFINDO rating agency has affirmed the idAAA rating for Shelf Registration Bond IV Adira Dinamika Multi Finance Phase IV 2019 series A amounting to IDR232.0 billion. PEFINDO has also affirmed its idAAA(sy) for Shelf Registration Sukuk Mudharabah III Adira Dinamika Multi Finance Phase III 2019 series A totaling to IDR127.0 billion. The bonds and sukuk will mature on February 3, 2020. The company’s readiness to repay its maturing bonds and sukuk will be supported by its cash and cash equivalent of IDR1.9 trillion at the end of September 2019 and financing receivable collections of IDR3.7 trillion per month. PT Adira Dinamika Multi Finance Tbk (ADMF) is a multifinance company which provides automotive purchase and multipurpose financing services. As of September 30, 2019, the company was 92.07% owned by PT Bank Danamon Indonesia Tbk and 7.93% by the public (including 0.42% by PT Asuransi Adira Dinamika).
PEFINDO rating agency has affirmed its idA- rating to PT Industri Kereta Api Indonesia (Persero) (INKA). The outlook for the corporate rating is stable. According to PEFINDO, the corporate rating reflects INKA’s strong support from the government, its leading market position in rolling stock manufacturing, and potential higher revenue from railway infrastructure development and broadened market scope. However, the rating is constrained by its aggressive capital structure, weak cash flow protection measures, and exposure to the fluctuation of raw material and component costs. PEFINDO also stated that the company’s rating can be upgraded its performance is above PEFINDO’s expectations, which should also be accompanied by significant improvement in its capital structure and cash flow protection measures. On the flip side, the rating could be downgraded if its delivery plan in the near term is delayed, resulting in weaker than expected capital structure and cash flow protection measures. The rating could also be under pressure if it adds significantly larger debt than expected, causing its key financial ratios to deteriorate beyond PEFINDO’s projections. INKA is a state-owned manufacturing company that mainly produces rolling stock products, and is the only player in Southeast Asia in this industry. Its products include passenger coaches, freight wagons, electric railcar multiple units (EMU), diesel railcar multiple units (DMU), locomotives, bogies, engineering, procurement and construction (EPC projects), and rail-related services. As of September 30, INKA was wholly owned by the Indonesian Government.