Jan. 10 (Bloomberg) -- Indonesia drew orders for double the $1.75 billion of 30-year dollar-denominated bonds it offered, a sign of investor confidence in developing economies during a record start to the year for emerging-market debt sales.
Southeast Asia’s largest economy sold notes due January 2042 with a 5.25 percent coupon to yield 5.375 percent, attracting $3.6 billion of bids, the finance ministry said. The rate was 240 basis points more than that for similar-maturity U.S. Treasuries and the sale was arranged by HSBC Holdings Plc, JPMorgan Chase & Co. and Standard Chartered Plc.
Developing nations and companies have already raised $29.2 billion in 2012, the most for the Jan. 1-10 period since Bloomberg started compiling the data in 1999. Brazil, Mexico and the Philippines have sold global bonds this year even as European nations struggle to contain a debt crisis. Fitch Ratings raised Indonesia’s ranking by one level to BBB- in December as it lowered France’s rating outlook and put Spain and Italy on review for a downgrade.
“Those emerging countries’ fiscal conditions are quite good, making it easier for them to issue and attract investors,” said Kenichiro Ikezawa, a Tokyo-based fund manager at Daiwa SB Investments Ltd. that oversees about $60 billion. “Indonesia just got upgraded by Fitch and of course, speculation is for others to follow suit eventually.”
PLUS Bhd., a Malaysian state-owned highway operator, leads emerging-market debt issuance this year, having sold 30.6 billion ringgit ($9.8 billion) of Islamic bonds globally. Saudi Arabia’s General Authority of Civil Aviation will start selling Islamic debt tomorrow to finance an airport expansion, according to a statement from the aviation authority. The project may cost as much as 27 billion riyals ($7.2 billion), Al-Eqtisadia newspaper reported last month.
BBVA Banco Continental, Peru’s second-biggest bank, plans to sell $300 million of five-year dollar bonds as soon as today, according to a person familiar with the plans who asked not to be identified because the terms aren’t set. Emirates Islamic Bank PJSC will probably sell a benchmark-sized dollar Shariah-compliant security, according to a banker familiar with the deal who declined to be identified because the information is private.
The extra yield investors demand to hold Indonesia’s 10-year dollar-denominated securities rather than similar-maturity Treasuries narrowed to 204 basis points from a two-year high of 324 basis points reached on Oct. 4.
‘Quite an Achievement’
The average yield premium for developing nations’ debt was 379 basis points yesterday, down from a two-year high of 443 basis points on Oct. 4, according to an index compiled by JPMorgan Chase. The gap was 248 basis points at the start of last year.
Bond funds focused on emerging markets took in $162 million in the week ended Jan. 4, Barclays Capital said, citing data from fund researcher EPFR Global. Dollar-denominated notes attracted $230 million while local-currency securities had redemptions of $125 million. Emerging-market debt funds absorbed $17.3 billion in 2011, a third of the $53.6 billion the previous year, EPFR Global data show.
Indonesia last sold $1 billion of 30-year bonds in January 2008 to yield 7.75 percent, 329 basis points more than the rate on similar-maturity U.S. government debt at that time.
“In this situation of global economic slowdown and the difficulty of refinancing in Europe, Indonesia getting a low financing cost is quite an achievement,” said Finance Minister Agus Martowardojo in Jakarta. “Bonds that mature in 30 years are good for our maturity profile.”
Indonesia’s gross domestic product will increase 6.2 percent in 2012, according to the median forecast in a Bloomberg survey of economists. The central bank estimates growth accelerated to 6.5 percent last year from 6.1 percent in 2010. Consumer prices rose 3.79 percent in December from a year earlier, the least since March 2010, official data show. The budget deficit amounted to 1.3 percent of gross domestic product last year, President Susilo Bambang Yudhoyono said last week.
Developing-nation economies will expand 6.1 percent in 2012, compared with 1.1 percent for the euro area, according to International Monetary Fund estimates published in September.
Parliament approved a land-acquisition bill last month that will allow the government to accelerate road, port and airport projects. The bill may reinvigorate Yudhoyono’s push to double spending on roads, ports and airports to $140 billion in his second term. Southeast Asia will have relatively strong economic growth in 2012, International Monetary Fund Deputy Managing Director Zhu Min said in Singapore on Jan. 5.
Recent developments “are potential rating triggers, including the passage of the land-acquisition bill” last month, Christian de Guzman, a Singapore-based assistant vice president at Moody’s Investors Service, said in an interview Jan. 4. Agost Benard, Standard & Poor’s Singapore-based associate director, reiterated the company’s stance that it may follow Fitch should the government continue to improve fiscal administrative and structural reforms, in an interview on the same day.
Moody’s lifted Indonesia to Ba1 in January 2011. In April, S&P raised the nation to BB+, with a positive outlook. The ratings are one level below investment grade.
The Philippines sold $1.5 billion of 25-year, sub-investment grade notes at a yield of 5 percent last week. Brazil sold $750 million of notes due 2021 on Jan. 3 to yield 3.45 percent, while Mexico issued $2 billion of 10-year bonds the same day to yield 3.71 percent, according to data compiled by Bloomberg. The Philippines sold its global notes a day later.
“You are better compensated for risk on Indonesia’s bonds than on the Philippine dollar bonds,” said Endre Pedersen, the Hong Kong-based managing director for fixed-income investments at Manulife Asset Management, which has an Asian bond portfolio valued at $29 billion. “Not only are you getting better yield but also a better sovereign credit.”
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