JAKARTA, Oct 3 With Indonesia expected to cut interest rates again by the end of this yea

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JAKARTA, Oct 3 (Reuters) With Indonesia expected to cut interest rates again by the end of this year as inflation eases, several big firms are setting their sights on cheaper financing and are planning new bank loans and bonds to fund expansion.

The government expects Southeast Asia's largest economy to expand 6.3 percent this year, its fastest pace in 11 years.

Firms such as telecoms player PT Excelcomindo Pratama Tbk and cement maker PT Semen Gresik Tbk are planning to invest in new factories and infrastructure to meet strong domestic demand.

''Appetite for bonds is huge due to the stable and low interest rates,'' Kahlil Rowter, president director of Indonesian ratings agency Pefindo, told Reuters.

Some analysts expect the central bank to cut its benchmark BI rate to 8 percent by the year-end from 8.25 percent.

Semen Gresik, the country's largest cement maker, plans to raise $500 million to invest in new plants and other facilities to meet demand from a booming construction and housing sector.

Demand for cars and motorbikes has also taken off, rebounding from a slump in 2006.

Indonesia's largest motorcycle financing company, PT Federal International Finance, said it plans to raise 2 trillion rupiah ($220 million) from a bond issue in the first half of 2008.

Excelcom, the No. 3 telecoms firm, and several of the big banks have also said they plan to take advantage of lower interest rates if the central bank cuts its benchmark rate, as expected, by the end of the year.

RATES TO EASE FURTHER Even if rates are held steady, borrowing costs which are among the highest in Asia, have already come down substantially.

Bank Indonesia has cut its key interest rate from a high of 12.75 percent in 2006 to a two-year low of 8.25 percent to spur corporate borrowing and boost growth while maintaining confidence in the rupiah, the worst-performing currency in Asia this year.

The U.S. Federal Reserve's half-point rate cut last month has given Indonesia's central bank more room to lower rates again, economists say, although a rise in inflation in September means a cut is more likely later in the year rather than this month.

Excelcom has earmarked $500-600 million for its capital expenditure next year and may sell bonds to fund that expansion and to refinance existing debt, Hasnul Suhaimi, Excelcom's president director, told Reuters.

He said he has not decided how much of the outstanding debt, which amounted to 7.9 trillion rupiah ($857 million) at the end of June, to refinance.

The country's second-largest lender, PT Bank Central Asia Tbk , is discussing a $300 million loan from Japan Bank for International Cooperation (JBIC), and another $300-500 million from International Finance Corporation, its vice president director told Reuters.

Indonesia's largest lender by assets, PT Bank Mandiri Tbk JK> , is planning to raise $300 million from a bond issue by January to help refinance debts and extend more loans.

''We are in the preparation stage. We will monitor for the best time for the issue within that period so we can have a good pricing,'' a Mandiri director Abdul Rachman told Reuters.

Mandiri has shortlisted five banks to underwrite the issue -- Barclays, BNP Paribas, Credit Suisse, Citibank and Deutsche Bank.

The head of Surabaya Stock Exchange, the main bond exchange, said in a recent interview that he expected Indonesian corporate borrowers to issue about 30 trillion rupiah worth of new bonds this year, while bonds worth around 8.5 trillion mature.

Companies have raised a total of 27.4 trillion rupiah from new bond issues so far this year. By the end of 2007, outstanding rupiah-denominated corporate debt is expected to reach 83 trillion rupiah ($8.85 billion), up 35 percent from 2006.

($1 = 9,088 rupiah) REUTERS KR ht1310

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