Retail sukuk bonds a hit with investors

Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Tue, 02/24/2009 10:54 AM  

The volume of  the new government retail sukuk (Islamic bonds) absorbed by individual investors is exceeding government expectations. 

That was according to official figures released by the Finance Ministry on Monday. 

The government managed to book orders of up to Rp 5.56 trillion (US$ 496.4 million) of retail sukuk in less than a month, or about 3 times its initial target of Rp 1.77 trillion as originally submitted by 13 designated selling agents. 

“It’s an example of how dynamic the financial market conditions are ... “ Finance Minister Sri Mulyani Indrawati said in a press conference. 

It was the first retail sukuk bond ever issued by the government.

 

 JP/IRMA

The selling agents are Bank Mandiri, Bank Syariah Mandiri, Citibank N.A., HSBC and Bank BII, as well as Danareksa Sekuritas, CIMB-GK Securities Indonesia, Reliance Sekuritas, Trimegah Securities, Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, BNI Securities, and Bahana Securities. 

They had set a low target taking into account potential concerns of  investors over financial instruments during a financial downturn. 

“We’ll sell our bonds as long as the price is rational, and the profile won’t burden the state budget. We’ll always cope with the dynamic market conditions,” Mul-yani added. 

The retail sukuk is part of the government’s effort to plug the budget deficit, which is forecast to reach Rp 136.9 trillion, or 2.6 percent of the gross domestic product, this year. 

According to the Finance Ministry, 14,295 investors have so far ordered retail sukuk, 42 percent of whom are residing in Jakarta. 

A large proportion of these investors, 46 percent of them, ordered a retail sukuk purchase of less than Rp 100 million in total. 

The retail sukuk is sold at Rp 1 million per unit, with a minimum purchase of Rp 5 million. The yield is 12 percent, maturing on Feb. 25, 2012. 

Most of the investors are working as civil servants, private employees, housewives and entrepreneurs. Private employees ordered the largest bulk of purchases, equivalent to about 39 percent of the total volume of the retail sukuk, so far. 

Mulyani said the largest single purchase of retail sukuk amounted to Rp 35.3 billion, while the lowest single purchase was Rp 5 million. 

The Finance Ministry named Mandiri and HSBC as the best selling banking outlets, and then Trimegah and Andalan Artha as the best securities outlets. 

The retail sukuk will be on offer until Feb. 25. It can then be traded after being listed on the

Indonesian stock exchange as of Feb. 26. 

The government is still also considering selling international sukuk bonds and medium term notes (MTN) in the coming months. 

Bond issues are a government  option for securing funds to help cover the state budget deficit.