Indonesia has had one of its most active years in investment banking and capital markets. Citi's Indonesia CEO Tigor Siahaan explains what is attracting investors.
While the rest of the world slowed, investment banking and capital markets activity has grown in Indonesia this year. Why?
It's a combination of factors really that have put Indonesia very much in the spotlight. On the capital markets side you have seen the Republic of Indonesia issue a sukuk bond and the state-owned electricity company PLN [Perusahaan Listrik Negara] issue a [$1 billion 10-year] bond in the past couple of weeks. Citi was a joint bookrunner on both.
The order books for both these issues were in excess of $12 billion, which underlined that the global investor base remains keen to search out investment opportunities in Indonesia. Let's not forget it's the world's fourth-largest country by population, and with GDP growth of around 6.5 percent it's an emerging market that is on most global fund managers' hit list. Think about it: international debt market issuance is now close to $7 billion; that's just $500 million or so below the all-time record year.
Investors clearly like Indonesia's macro story, but these are still tough markets. How important was the timing and execution of those deals?
What was important in the success of these recent transactions was that both issuers showed flexibility and could act fast. In these markets, windows of opportunity can open and shut in a morning. It is no coincidence that both these issuers regularly update via investor briefings/non-deal roadshows and have active medium-term note programmes allowing for fast issuance to capture market opportunities. More issuers in Asia should take note of this proactive approach.
But you are right, Indonesia is hot right now. What we have seen in the past couple of weeks really is a continuation of a key theme in 2011 where Indonesia has been at the heart of activity. You have had record M&A levels in Indonesia this year, which also included one of the largest private equity investments into the country by CVC [in the acquisition of Link Net - the second-largest fixed broadband operator in Indonesia]. You have also had some important equity transactions this year such as Bank Mandiri's and the Garuda Airlines IPOs.
What's the outlook for 2012? More of the same?
Honestly, I think we are only getting started. If you look at the numbers, Indonesia accounts for less than 5 percent or so of investment banking revenues in Asia, according to various data providers. For Citi, Indonesia accounted for well over 10 percent in 2011 and it will continue to grow further as you will have more Indonesian companies who will want to raise capital to support their growth and there will be continued M&A activity.
Indonesia is one of the world's fastest growing economies - it grew 6.5 percent year-on-year in the third quarter. If anything, the Brics [Brazil, Russia, India, China] should now come with a double-I. This growth is feeding through to corporates who have ready access to capital and increasing aspirations, and will look overseas for targets.
You will also see a continued stream of global companies and even regional companies who increasingly look to tap into Indonesia's growth story. It is interesting that a few years ago when I met with CEOs when I went on global roadshows, the first thing clients wanted to ask about Indonesia was politics or even how close was Indonesia to China. Now the first thing they say is: 'Give me 10 ideas for where I can invest in Indonesia,' and then: 'What's the best hotel in Bali?'
And what 10 ideas do you give them?
I would like to keep a few secrets up my sleeve but obviously areas such as commodities are interesting. But let's not forget Indonesia is one of the largest countries in the world with an increasingly affluent population, and this is also feeding through into the consumer areas so there are opportunities to tap into this growth story too. Indonesia's population of 243 million ranks behind only those of China, India and the US.
And what's that hotel in Bali?
They are all spectacular.
How diplomatic. Ok, how is the local brokerage you opened last year going?
It has been a strong first year but we have been obviously helped that Indonesia has been one of the best performing stock markets in 2011 - it recently overtook Malaysia to become the ninth-largest stock market in Asia.
We have seen foreign investors stepping up the buying of Indonesian shares as China and India increased demand for coal and palm oil, which has benefited stocks in Indonesia. Rising incomes have also spurred domestic spending, lifting consumer companies' attractiveness to global investors.
It's close to Christmas; what's top of your wish list?
Can I say anything else than Best Bank and Best Investment Bank in Indonesia next year from FinanceAsia? -By Lara Wozniak