MSCI下调印尼市场分类威胁持续发酵，KB Bank Indonesia推迟美元债发行

MSCI Inc.’s threat to strip Indonesian equities of emerging-market status is now also weighing on dealmaking in the corporate bond market.

Bank KB Indonesia postponed a dollar bond sale, which would have been the first by a company from the nation since the index provider’s warning, according to people familiar with the matter. The lender cited market volatility for halting the sale and said it may revisit markets at a later stage, the people said, asking not to be identified discussing private information.

A spokesperson for the issuer wasn’t immediately able to comment.

The pulled bond sale also faced a tougher global backdrop after yield premiums on corporate bonds around the world widened to a 17-month high, as concerns about AI funding and mounting fiscal challenges facing governments dented risk sentiment. Still, Indonesian corporate bonds have sold off more than regional peers after MSCI’s Oct. 15 announcement put a spotlight back on governance issues in Southeast Asia’s largest economy.

Read also: Indonesian Corporate Bond Risk Gauge Rises to Six-Year High

Moody’s Ratings and Fitch Ratings lowered their outlooks on the sovereign earlier this year, citing concerns about policy credibility and governance under President Prabowo Subianto.

The MSCI threat and ratings actions by Moody’s and Fitch have “hurt investor sentiment” toward Indonesia in general, according to Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc. KB Bank’s inability to issue the dollar bonds can also be attributed to idiosyncratic factors such as its small size, weak standalone fundamentals and rush to issue before the end of the month, he said.

KB Bank had begun marketing on Monday a three-year note with an expected rating of BBB from Fitch, the firm’s second-lowest investment-grade credit score. The initial pricing guidance of around 275 basis points over Treasuries on the deal was one of the widest for an investment-grade bond in the market so far this year, and compares with roughly 120 basis points for similarly-rated Asian corporate debt, data compiled by Bloomberg show.

KB Bank is two-thirds owned by higher-rated South Korean lender Kookmin Bank. The initial mandate announcement for a potential deal came earlier this month before the MSCI warning.

“Government-owned issuers with decent fundamentals should still be able to access the dollar bond market,” added Nomura’s Yap. “Although they will likely have to provide investors with larger-than-normal new-issue premiums.”