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Source: Reuters

UPDATE 2-Indonesia eyes $316 mln retail sukuk issue in Feb

Published: 21 Dec 2009 01:05:05 PST

* Indicative target for retail sukuk next year at 3 trln rph

* 20.3 trln rph assets earmarked for domestic sukuk in 2010 (Adds analyst quote, details)

JAKARTA, Dec 21 -Indonesia's finance ministry has set an indicative target of 3 trillion rupiah ($316 million) for its retail sukuk bonds due to be sold in February, Rahmat Waluyanto, head of the ministry's debt office, said on Monday.

The sukuk, or Islamic bonds, are part of an array of debt instruments aimed at retail, institutional, and foreign investors, as the finance ministry plans to borrow 175.1 trillion rupiah in 2010 to fund its budget deficit and repay maturing bonds.

The finance ministry has 20.3 trillion rupiah worth of underlying assets earmarked for its domestic sukuk programme next year, Waluyanto said.

"The assets include land and property owned by 27 ministries and state institutions," Waluyanto told reporters.

Islamic finance does not allow lending in return for interest, so borrowing, via instruments such as sukuk, typically involves the sale and purchase or lease of specific assets.

The indicative target for the retail sukuk was determined by the proposed targets from each selling agent, but it could be revised depending on demand and budget needs, Waluyanto said.

Investor demand for Indonesian debt, including sukuk or Islamic bonds, is likely to remain strong, said Desimon, a director at brokerage Trimegah Securities <TRIM.JK>. "Funds will search for markets that can give high yield with low risk. The three trillion rupiah target will easily be reached," he said.

Southeast Asia's biggest economy has gradually broadened its range of debt instruments and debt maturity profile over the past few years to attract a wider array of domestic and international investors and ease its funding burden as short-dated debt matures. [ID:nJAK479028]

The finance ministry indicated last week this trend would continue, with plans to raise $750 million in a global sukuk in July as part of its global MTN programme, and to sell a retail sukuk in February. It is also considering a samurai bond issue. ($1 = 9,490 rupiah)

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