Leong Wai Leng, chief financial officer of Temasek Holdings, says the rapid growth and development of Asian bond markets as a significant alternative funding source for issuers and investors is important and welcome.

 

“Over the next three years, the market expects some USD17 trillion of public debt refinancing and budget deficit funding obligations to come due from the US, UK, Japan and Eurozone,” she told the delegates at The Asset 5^th annual Asian Bond Markets Summit held in Singapore on November 16. “The Asian and Singapore bond markets would provide corporate issuers alternative markets to meet their requirements.”

 

Leong says that based on a research report by Morgan Stanley, the record bond issuance expected in 2010 will continue to be absorbed by record demand in Asia. “More than half of non-financial issuances this year have been first time issuers, reflecting a broadening market,” she notes. “The good news for issuers is that the demand side is growing faster than the supply side.”

 

On the Singapore bond market, Leong says there had been some perception for some time that it does not accommodate large sizes and tenors beyond 10 years. But this has changed as Temasek itself plays an important role in shaping up the market. “Our experience has shown that the Singapore bond market has been developing rapidly in recent times, and presents many interesting opportunities for issuers and investors,” she points out.

 

Temasek tapped the Singapore dollar bond market in December 2009 with its first two issues of SGD300 million (USD230.8 million) each in the 20-year and 30-year tenors. These issues were rapidly taken by the institutional investors in under two hours.

 

Once Temasek established that long-term funding at competitive rates, it issued a benchmark SGD1 billion offering in February this year on an accelerated bookbuild basis, in the sweet spot of 10 years. It then followed on with issues in the 15-year and 25-year maturity in March 2010 in response to interests from investors in these tenors.

 

Finally, Temasek pushed the boundary and issued a landmark 40-year Singapore dollar bond in July this year for SGD1 billion.

 

“The Temasek issues and the many Singapore dollar bond issues in the past two years show that the Singapore bond market has the liquidity and can accommodate size and tenor,” Leong says. “This makes Singapore dollar bonds a possible funding source for local and foreign issuers and investors.”

 

Along with the deep liquidity pool, the Singapore dollar bond market has seen an increase in the diversity of investors. “The increased investor diversification also provided for more active secondary market trading of the bonds,” Leong adds.