Large USD-Denominated Bond Sale; Indonesia's Rupiah Moves Sideways
The Indonesia rupiah exchange rate is moving sideways on Wednesday's trading day (08/01). At 13:00 local Jakarta time, the rupiah was down 0.02 percent to IDR 12,240 per US dollar based on the Bloomberg Dollar Index. This morning the US dollar slightly depreciated against most Asian currencies after the International Monetary Fund (IMF) said to plan to upgrade its forecast for global economic growth as the US economy improves. Yesterday, Indonesia held Asia's largest US dollar-denominated bonds since 1998.
Yesterday (07/01), the Indonesian government issued US dollar-denominated bonds - two USD $2 billion tranches of 10-year (5.95 percent yield) and 30-year bonds (6.85 percent yield) - as a means to finance the state budget (APBN). Last year, the government could borrow at a lower percentage rate (5.78 percent and 6.46 percent respectively) but increased coupons in order to make the issuance more attractive. After the rupiah depreciated around 26 percent against the US dollar in 2013, the government is in need of foreign funds for debt settlements. The weak rupiah in 2013 was partly caused by concerns about the country's wide current account deficit. In combination with high inflation, the central bank (Bank Indonesia) raised its benchmark interest rate by 175 percentage points from 5.75 percent in June 2013 to 7.50 percent in November 2013.
The bonds issuance was a success. Newspaper Bisnis Indonesia reported on Wednesday that the issuance was oversubscribed 4.4 times. Indonesia is seeking to raise a record IDR 357.96 trillion (USD $29 billion) from both international and local debt capital markets in 2014.
Although yesterday, Goldman Sachs and JP Morgan advised investors to sell stakes in emerging economies ahead of the winding down of the Federal Reserve's quantitative easing program, today it was reported that the IMF will raise its global growth forecast. This led to rising emerging market stocks and currencies.
Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) appreciated 0.27 percent to IDR 12,229 per US dollar on Wednesday (08/01):
Market participants are also still waiting for the FOMC minutes (which will be released today), the meetings of the European Central Bank and Bank of England, and US employment data (will be released 10 January).
Indonesia Stock Exchange
Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG) declined 0.02 percent to 4,174.85 points during the first trading session on Wednesday (08/01).
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