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China
Google, Temasek in talks convertible
bond hype
sees $624bn
G
oogle and Temasek Hold-
ings are in negotiations to join
A
a funding round of between hunt for returns in China
$500mn and $1bn for Indonesian e- is triggering the biggest
commerce giant PT Tokopedia, ac- stampede into converti-
cording to people familiar with the ble bonds since before the global
matter. financial crisis.
Tokopedia, the online marketplace Investors seized the chance
backed by SoftBank Group Corp’s Vi- to take part in Shanghai Weaver
sion Fund, has held talks with US In- Network Co’s bond sale in June,
ternet giants including Facebook Inc, with the deal about 170,600
Microsoft Corp and Amazon.com Inc, times oversubscribed – the
the people said. highest level since at least 2007,
But Google and Temasek have been according to East Money Infor-
more active in their negotiations and mation Co’s website.
those talks may conclude in com- The average retail subscrip-
ing weeks, they said, asking not to be tion amount for each of this
identified because the discussions are year’s 57 deals through May was
private. 4.41tn yuan ($624bn), Haitong
America’s largest Internet corpo- Securities Co analysts wrote in a
rations have looked increasingly to- recent note.
wards Asia as growth in the US and That was about seven times
Europe slows, seeking to tap the re- more than in the first half of last
gion’s rapidly growing smartphone- year, according to the analysts’
savvy population. data.
Facebook is buying a stake in India’s After regulators last year
Jio Platforms, while its WhatsApp moved to cool a frenzy for con-
unit struck a deal last month to invest vertible bonds, China’s ultra-
in ride-hailing and food delivery giant low interest rates and this year’s
Gojek. Representatives for Tokopedia plentiful liquidity are again fuel-
and Temasek declined to comment. ling demand.
Google didn’t respond to an e-mail The increasingly speculative
seeking comment. nature of the market is apparent
The backing of Alphabet’s Google amid concern China may soon
and Singaporean state investment witness its first convertible-
firm Temasek would mark a major bond default.
boost for one of Southeast Asia’s big- Wild swings in some convert-
gest e-commerce operators. ible bonds prompted closer reg-
Tokopedia co-founder and chief Employees work in front of computers at PT Tokopedia’s office in Jakarta. Tokopedia co-founder and chief executive officer William Tanuwijaya built the country’s most ulatory scrutiny earlier this year.
executive officer William Tanuwi- valuable startup after Gojek after scoring early backing from SoftBank founder Masayoshi Son and Alibaba Group Holding co-founder Jack Ma. In two offerings sold on
jaya built the country’s most valuable Thursday, YingTong Telecom-
startup after Gojek after scoring early erg News in October. Tokopedia came id-19 pandemic, which is rapidly online purchases during widespread up.Indonesia has become a key bat- munication Co saw the book
backing from SoftBank founder Masa- close to finalising its latest financing changing the online shopping land- lockdowns. tleground between the regional rivals: 114,100 times covered, while
yoshi Son and Alibaba Group Holding this year before news emerged of a re- scape in the world’s fourth most pop- Singapore-based rival Shopee – a The country’s e-commerce market Shandong Dawn Polymer Co’s
Ltd co-founder Jack Ma. cent data theft attempt that may have ulous nation. unit of Sea Ltd – is catching up, while is projected to expand from $21bn in notes were 90,175 times over-
It now plans to list shares at home affected 15mn of its users, one of the E-commerce platforms are now Alibaba last month appointed a long- 2019 to $82bn by 2025, according to a subscribed, according to their
as well as in another as-yet-undecid- people said. moving quickly to serve the millions time veteran to head up Lazada and recent study by Google, Temasek and filings late Thursday.
ed location, Tanuwijaya told Bloomb- It was also held back by the Cov- of people forced to make their first “fight harder” as competition heats Bain & Co. “Convertible bonds meet the
needs of the market amid de-
clining bond yields,” said He
Qian, a fund manager at HFT In-
vestment Management Co, who
S&P sees no imminent risk to Indonesia rating from debt plan says more companies will tap the
market given the relatively cheap
funding available. “For fixed-
income investors in the second
Bloomberg deficit with the central bank will weak- response to questions. “This is no dif- half of the year, it will be a key
Jakarta en its independence and trigger rating ferent from the situation that the bank source of outsized returns.” Av-
downgrades. faces in its ordinary course of mon- erage first-day gains in April and
The cost of protecting Indonesia’s etary operations.” May were 16% and 15% respec-
T
he Indonesian government’s five-year dollar bonds, or credit-de- For Moody’s, what will influence its tively, compared to 9.4% in the
plan to sell billions of dollars of fault swaps, slid 14 basis points this rating decision will be “the duration first half of last year, according
bonds to the central bank to fi- week, the most in a month. and other binding constraints under to Haitong.
nance a widening fiscal deficit poses no The so-called burden-sharing plan which the measures are extended,” Investors typically bet on the
immediate threat to the nation’s credit is under “tough discussion” by the Anushka Shah, a senior analyst in securities for potential gains on
rating, according to S&P Global Rat- government and Bank Indonesia to Singapore, said in an e-mail. That “in the equity conversion.
ings. S&P, which already has a negative ensure a prudent plan that maintains turn would determine the scope and When a company sells a con-
outlook on Indonesia’s rating, makes both monetary independence and fis- extent of their usage as a lever to in- vertible, existing shareholders
no distinction between the debt issued cal integrity, a senior finance ministry crease fiscal expenditure beyond what have the right to participate in
by the government, be it to the central official said Friday. is deemed necessary for economic re- the deal to avoid dilution.
bank or to commercial investors, in as- Under the deficit financing propos- covery and rehabilitation,” she said. And unlike most equity offer-
sessing its fiscal impact, according to als, Bank Indonesia may buy bonds Indonesia is rated Baa2 at Moody’s, ings, the bonds don’t have lock-
Kim Eng Tan, a sovereign analyst. worth 574.4tn rupiah ($40bn) to fund equivalent to S&P’s rating. up requirements.
Moody’s Investor Service said sepa- the government’s pandemic response, While the stimulus measures an- That means insiders can sell as
rately that inflation is well-anchored according to the finance ministry. nounced by Indonesia’s government soon as the first day of trading.
in Indonesia and the credit outlook President Joko Widodo’s adminis- will have some effect on fiscal and debt Convertible bond offerings in
would depend on debt duration and tration needs to borrow 1.65 quadril- metrics, the impact will not be mark- China are usually hundreds or
other constraints. lion rupiah this year to fund a budget edly different from the likely deteriora- even thousands of times over-
“Unless there are material and un- deficit of 6.34% of gross domestic tion in other regions, Shah said. subscribed given limited supply
foreseen economic or financial disrup- product and repay its debts. Southeast Asia’s largest economy compared to other types of se-
tions, we do not believe that this plan While some economists have argued entered the crisis with comparatively curities, such as corporate bonds
will affect the credit metrics more than the deficit funding may impact infla- strong fiscal buffers, providing it some or stocks.
we currently expect,” Tan said. tion and money supply in the long run, fiscal space to react, she said. Investors don’t have to pay the
S&P recently downgraded its out- S&P’s Tan said the size of the program “Like many emerging markets glo- full amount of their bids until
look on Indonesia’s BBB rating, the wasn’t large enough to materially af- bally, BI’s move towards unconven- after they get their allocation.
second-lowest investment grade fect monetary operations. tional quantitative easing represents A key difference in this year’s
score, because of the expected fiscal “The impact of inflation, which one way for the government to fund frenzy is that smaller and lower-
deterioration brought about by Cov- recently fell below 2%, will depend its wider borrowing requirements in rated issuers have dominated the
A man walks past an entrance to the Bank Indonesia headquarters in Jakarta. Under the id-19. Indonesia’s currency tumbled partly on how much Bank Indonesia the wake of higher coronavirus-relat- primary market in the first half,
deficit financing proposals, Bank Indonesia may buy bonds worth 574.4tn rupiah ($40bn) 2.1% this week on concern the plan offsets the liquidity impact of its bond ed spending and stimulus measures,” prompting some caution from
to fund the government’s pandemic response, according to the finance ministry. to split the cost of funding the budget purchases,” Tan said in an e-mailed Shah said. analysts.