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Tuesday December 6, 2011

Indonesia central bank plans to allow sukuk for reverse repo

JAKARTA: Indonesia’s central bank plans to allow the trade of syariah bonds for its reverse repo operations, deputy governor Halim Alamsyah said, in a move aimed at deepening the local sukuk market.

Bank Indonesia was drafting the rules, which may be effective next year, Alamsyah said.

The central bank’s reverse repo operations are aimed at absorbing excess liquidity from the financial system.

Indonesia has the world’s largest Muslim population, yet it lags neighbour Malaysia in attracting foreign investors into the local sukuk market, which is dominated by local banks and insurance firms.

Foreign investors held 6% of total outstanding sukuk as of Nov 18, the latest government data show. This compares with about 30% ownership in conventional government bonds.

The country sold US$1bil of seven-year global sukuk last month at a low 4% yield, in an offering that Thomson Reuters IFR said was six times oversubscribed on strong demand from the Middle East and Asia. — Reuters

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