Asia Financial Services

A series of large-scale government bond issues in Indonesia is the latest sign of the benefit of an improved credit rating in accessing international capital. The government is lining up a $1.75bn global bond issue for October, including a $1bn sukuk (sharia-compliant bond) and $750m worth of Japanese yen-denominated conventional bonds.

The positive assessment of recent progress at Sabah’s state banks underlines the confidence in the potential of its financial services sector, particularly in the area of Islamic finance.

Local business leaders and foreign investors alike are expressing confidence in the outlook for Indonesia’s insurance sector despite a traditionally low base. Continued economic growth, low levels of penetration and good performances from leading firms so far this year are all upside indicators.

As government programmes expand basic insurance coverage in Mongolia, economic growth spurred by resource revenues is expected to create surging demand in the private insurance market. However, ensuring the latter is managed by appropriate legislation represents a challenge to regulatory bodies.

The government is looking to tap the bond market to make up its budgetary shortfall for this year and launch more debt offers to fund its ambitious infrastructure programme. Pricing could be an issue, however, with concerns that uncertainty over the European financial crisis could cause ripples in Asian economies and push up borrowing costs.

Moves to liberalise Malaysia’s pensions market are expected to galvanise the Islamic finance market, already a key segment of the country’s economy, though greater regulatory oversight will be needed to bolster investor confidence in the sector.