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Sukuk transactions soar

JAKARTA: The transaction of sukuk, the Sharia-based securities, issued by the government and companies, rose in the first quarter this year, each recording a 106% increase and 72% increase as compared to a year earlier. The transaction of government

JAKARTA: The transaction of sukuk, the Sharia-based securities, issued by the government and companies, rose in the first quarter this year, each recording a 106% increase and 72% increase as compared to a year earlier. The transaction of government sukuk rose to IDR2.64 trillion, compared to IDR1.28 trillion in the same period last year, while corporate sukuk rose to IDR902 billion from IDR526 billion, according to Indonesia Stock Exchange data. The increased activity in the sukuk trading has exceeded that of the regular government bonds and the government retail bonds (ORI), which only saw an increase of by 26% and 28%, respectively. Ramdhan Ario Marutho, head of fixed income division of PT Anugerah Securindo Indah, said the reversing trend which favors sukuk trading is because sukuk now has various issues and varieties and that the country has better investment conditions for such Islamic financial products. "Sukuk now have many variants to attract investors, as Islamic banking is growing rapidly. More pension funds are investing in sukuk," he said over the weekend. Sukuk offers "far enough higher" yields compared to conventional bonds with the same tenors, so it is encouraging investors to glance at the Islamic-based bond. "You could say the difference in yields range from 15 to 20 basis points." Nevertheless, in terms of total value, the government bond market still has a higher transaction value, which was at IDR356.94 trillion, or 84.8% of total securities transactions which amounted to IDR420.89 trillion. The government sukuk contributed only 0.62% of total transaction of government securities or an increase from 0.38%. Secondary marketHe said the condition of the secondary market of the government bond (SUN) is volatile, so the number of corporate bond issuers refrained from using it as benchmark to determine the coupon rate of corporate bonds."Actually the issue is not new. Formerly there was also a bond issuer which did not use SUN as the benchmark. Now the condition is repeating since the market is volatile," he said.Ramdhan also saw a 2% decrease in the frequency of corporate bond trading and corporate sukuk in the first quarter 2011 compared with the same period last year, and this was due to the great number of bond sales which happened earlier this year. IDX Trading and Membership Director Wan Wei Yiong said that although the frequency of corporate bond transactions in the first quarter of this year fell compared with the frequency in the same period last year, transaction volume still continued to increase.PT Mandiri Securities Investment Banking Director Dadang Suryanto also said the government securities' secondary market condition is fluctuating, so the company chose not to use SUN as the benchmark for a fair reference for investors and corporate bond issuers. (T03/NOM)

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