Indonesia's Top Brokerage Sees Uncertainty Spawning Deals

(Bloomberg) -- An expected spike in market volatility from global geopolitical events may create more opportunities for investors, brightening prospects for equity and debt underwriters, according to Indonesia’s largest brokerage.

PT Mandiri Sekuritas, a unit of the country’s second-largest bank by assets, expects to underwrite more initial share sales this year than in 2018, when it was involved in five IPOs, President Director Silvano Rumantir said. The securities firm, owned by PT Bank Mandiri, has already bagged the mandate to help with IPOs of three companies, including a mining firm, he said.

Indonesia's Top Brokerage Sees Uncertainty Spawning Deals

“Whenever there’s a political event, or geopolitical event, there will be volatility and that means opportunities,” Rumantir said in an interview. “We are certainly hopeful we can grow from last year and we will increase our presence in the private sector space and get more share in the advisory business.”

With foreign investors returning to Indonesian shares this year, the benchmark index is on course to hit a fresh record and that may encourage companies looking to raise more funds. Indonesia saw a record number of IPOs last year even as the nation was swept in an emerging-market rout triggered by rising U.S. interest rates and dollar.

“Foreign investors have a very positive outlook on Indonesia for now because we have a decent growth with a reasonable valuation,” said Tjandra Lienandjaja, deputy head of equity research at Mandiri Sekuritas. “The inflow seems to be a reversal after investors dumped Indonesian equities last year.”

Fund Flow

Foreign investors have bought a net $716 million of Indonesian stocks through Jan. 28, on course for the biggest monthly inflow since April 2017. They were net sellers of a record $3.66 billion in 2018, according to data compiled by Bloomberg.

Mandiri expects more Indonesian companies to tap alternative financing such as asset securitization, Rumantir said. Toll-road operator PT Jasa Marga and flag carrier PT Garuda Indonesia are among companies which have raised funds through securitization, where borrowers use future earnings as underlying assets rather than diluting the equity.

Below are Mandiri’s views on the interest rate outlook and details of its expansion plan.

  • Mandiri Sekuritas plans to offer trading in Indonesian government bonds from Singapore this year
  • Indonesian companies are expected to raise around 120 trillion rupiah ($8.5 billion) through bonds this year, more than the 113 trillion rupiah issued in 2018
  • Mandiri Sekuritas expects Bank Indonesia to raise rates by 25 basis points this year and the benchmark Jakarta Composite Index will rally to 7,000 by the end of 2019

©2019 Bloomberg L.P.