Asian debt markets got off to a flying start in 2012, recording all time record issuance for January as global investors look for new safe homes for their cash and issuers look to guard against the disappearance of other financing options.
Investment grade Asian companies outside Japan issued $5.76bn worth of bonds in international markets in January, which is by far the biggest total ever seen for the first month of a year and is the third biggest total for any month in the past three years, according to Dealogic.
Adding in financial and sovereign issuance from the region takes the total to more than $10bn. The only area to remain truly moribund was the much less developed high-yield market.
Bankers pointed to a string of factors that had encouraged the wave of issuance including the withdrawal of bank financing by European banks and decline in equity markets; the slowdown in terrible headlines from the eurozone; and pent-up supply from the very difficult second half of last year.
They added that even though a single month’s supply could not be extrapolated to predict a trend for the full year, the likely continuation of these factors meant 2012 should be a solid year for Asian debt issuance and for other international companies to look to sell deals into Asia.
“We’ve seen a few less negative macro headlines, fairly orderly secondary markets and an active investor base – that’s exactly the time for issuers to enter the market,” said Duncan Phillips, head of Asia debt syndicate at Citigroup.
Hutchison Whampoa, Hong Kong’s sprawling telecoms-to-retail conglomerate, dominated corporate issuance, raising nearly $2.5bn over two separate deals in January.
Dominique Jooris, head of investment grade capital markets for Goldman Sachs in Asia, said some companies were looking to ensure they had funding available whatever happened with broader financial conditions.
“For some issuers, planning for contingencies has been very important,” he said. “Bank lending has become much less reliable, particularly for the longer tenures. Five year or seven-year money is really only available in bond markets now.”
On the financial side, Mark Leahy. head of debt origination for Asia ex-Japan at Nomura, said high-grade issuers, including Kexim, the Korean export-import bank, and secured deals such as covered bonds, were benefiting from a hunt for safety among fixed income investors.
“Global issuers are looking for a defensive, high-grade home and Australian covered bonds and issuers like Kexim, which managed to complete its first jumbo deal of more than $2bn, are filling that gap,” he said.
“There is no reason at all that I can see why that demand won’t trickle down into investment grade corporates.”
Others doubted there was such a geographic shift occurring, especially as the supply of such debt and highly-rated local sovereigns was still small compared with European supply.
Mr Jooris still expects a good year for debt though. “I don’t think the market can sustain this pace of issuance, but the prospects still are that this is going to be a very solid debt year,” he said.
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