Jakarta raised 7 billion yuan in its first panda bond sale. The deal diversifies funding away from the dollar as the rupiah slides to record lows.
Indonesia sold its first panda bonds in China's domestic market, raising up to 7 billion yuan ($1 billion) through three- and five-year notes.
The sale adds a new funding channel for Southeast Asia's largest economy. Jakarta has already raised about $7 billion this year through euro and yen bonds, a record for its non-dollar borrowing.
The rupiah has hit a series of record lows in 2024. The Jakarta stock index is the world's worst performer. President Prabowo Subianto's state-focused policies and a widening current account deficit have weighed on investor sentiment, traders and analysts said.
Bank Indonesia has raised rates to steady the currency. Import costs and fuel subsidies still pose risks, the central bank has said.
Moody's and Fitch cut their outlook on Indonesia's credit rating to negative earlier this year, citing governance risks. China Lianhe Credit Rating assigned a AAA rating. Moody's Corp, which rates the sovereign, carries an Alpha Score of 57 out of 100 from AlphaScala, placing it in the Moderate category. MCO stock page
The panda deal fits a broader push by emerging market sovereigns to reduce reliance on the dollar. The readthrough for other EM sovereigns: the panda market offers a viable alternative when dollar funding turns expensive or politically risky. A successful sale could open the door for Indonesian corporates to follow, bankers said.
David Yim, head of capital markets for Greater China and North Asia at Standard Chartered, said panda bonds for sovereigns are "more strategic than driven by urgent funding needs." The deals create benchmarks for local issuers, he added.
Total government debt stood at 9,920.4 trillion rupiah ($553 billion) at the end of March, mostly in domestic securities.
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