Indonesia Leads Asian Debt Gains as Region’s Fund Outflows Slow

Dollar-denominated bonds sold by Indonesia’s corporates and sovereign are the best performing notes in Asia this month as outflows from the region’s debt funds moderate.

Indonesian securities returned 4 percent in February, beating gains of 2.5 percent in Macau and 3.5 percent in Sri Lanka, according to Bank of America Merrill Lynch indexes. PT Multipolar sold $30 million more of its 9.75 percent 2018 bonds today, a person familiar said, asking not to be identified because the details are private.

Investors withdrew $316 million from bond funds dedicated to Asia outside Japan in the week to Feb. 19, 25 percent less than a week earlier, according to HSBC Holdings Plc and EPFR Global. More than $265 million was added to Indonesian government bonds, bringing inflows to $982 million for the year, the data show. The nation’s current-account deficit slid to 1.98 percent of gross domestic product in the final three months of 2013, down from a record 4.4 percent in the second quarter, the central bank said this month.

“Indonesian bonds were hit the worst last year due to worsening macroeconomic conditions, which reversed in the last few months,” said Ezra Nazula, the head of fixed-income at PT Manulife Asset Management, which oversees about $3.8 billion. “Better fundamentals are causing investors to enter the market again, given the attractive yield levels. The global risk-on mode in the last few weeks also helped.”

Listrik Negara

Thirty-year bonds sold by Indonesia’s state-owned electricity utility PT Perusahaan Listrik Negara and oil explorer PT Pertamina returned the most in Southeast Asia’s largest economy, gaining 9 percent and 7.6 percent respectively this month, Bank of America Merrill Lynch indexes show. Asia dollar bonds added an average 1.5 percent in the same period.

Yields on Indonesian debt fell 53 basis points this month, the third-most in Asia behind Sri Lanka and Pakistan, the indexes show. The cost of insuring Indonesian government bonds from default declined 42.5 basis points, the most since October, according to data provider CMA.

Multipolar, a Jakarta-based information technology services provider, only has one U.S. dollar bond outstanding, according to data compiled by Bloomberg. The company sold $200 million of notes at par in July. The bonds traded at 103.7 cents on the dollar as of 2:10 p.m. in Hong Kong.

Measures of Asia-Pacific corporate and sovereign risk fell today, traders of credit-default swaps said.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan retreated 2 basis points to 133 basis points as of 8:51 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is set to drop for a fourth day to its lowest close since Feb. 17, according to data provider CMA.

The Markit iTraxx Australia index lost 1 basis point to 101 as of 11:53 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The benchmark is on course for its lowest close since Feb. 18, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index was little changed at 76.5 basis points as of 9:42 a.m. in Tokyo, Citigroup Inc. prices show. The measure is poised for a 5.5 basis-point drop this month, according to CMA.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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