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The Asset Triple A Country Awards 2020 – North Asia
China drives the strong deal flows in bond and equity capital markets
8 Dec 2020 | The Asset

When Covid-19 was first reported in China, all eyes were on the mainland to see how its economy and the capital markets would respond to the then unravelling global health crisis. Everything almost ground to a halt and what followed was a period of muted capital markets issuance in February and March as both issuers and investors came to grips with the extent and severity of the value destruction in different asset classes.

But with strong coordinated central bank actions around the world, along with the announcement of stimulus packages and the realization that the sell-off was overdone, markets recovered from the initial shock and China resumed its role at the forefront of capital markets activity in the region.

One of highlights of the issuance activity in China in the early stage of the pandemic was the introduction of the Covid-19 prevention and control bond label by the regulator National Association of Financial Market Institutional Investors (NAFMII). There was a raft of issuances from different sectors, such as pharmaceutical companies, and hotel and tourism, to help address the challenges brought about by the health crisis.

For instance, the proceeds from the one billion yuan (US$153 million) anti-Covid-19 bond issued by Hubei Jointown Pharmaceutical Group were used for emergency procurement, transportation and storage of medical materials such as masks and sanitizers in Hubei province.

Multilateral agencies, such as the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB), joined in and arranged anti-Covid-19 financing through the Panda bond market. The five billion yuan offering by NDB priced in April was the first yuan-denominated anti-Covid-19 bond issued by a multilateral development bank, with the proceeds earmarked to support the Chinese government in financing public health expenditures in the provinces of Hubei, Guangdong and Henan, which were hard-hit by the pandemic.

These types of deals illustrate the multitude of transactions evaluated by the board of editors at The Asset for The Triple A Country Awards 2020 amid the record number of submissions that we received this year. China deals are split into onshore and offshore categories to reflect the large volume of domestic and offshore Chinese-related transactions done during the review period.

Such a strong deal flow was noted in China’s equity capital markets, in which US$211.77 billion worth of offshore deals were arranged as at November 16 this year, compared with US$117.40 billion in the same period a year ago, according to Refinitiv. This comes as the amount of follow-on offerings increased from US$38.38 billion to US$100.92 billion during the same period, while proceeds from initial public offerings (IPOs) more doubled from US$35.29 billion to US$74.13 billion.

Outstanding deals

Among the deals that stood out in 2020 include the US$3.9 billion secondary listing for JD.com, representing the second largest equity offering globally this year, and the US$1.7 billion US IPO for XPeng, the largest electric vehicle IPO worldwide by deal size and by market capitalization.

China’s G3 bond issuance was also robust this year amounting to US$166.88 billion as at November 16 – or just a shade below the US$167.10 billion raised in the corresponding period in 2019. The issuances were driven by investment-grade credits as they took advantage of the prevailing low interest rates, offsetting the 20.4% decline noted in the high-yield bond space from US$50.62 billion to US$40.27 billion during the same period. The slackening in the high-yield bond market is likely to continue as one senior banker points out. “Going forward, I see the high-yield issuances start to slow down because investors are not going to put their profitability at risk towards the end of the year,” he adds.

Issuances out Hong Kong, meanwhile, rose 20.6% to US$57.24 billion, while those out of South Korea fell 18.3% to US$22.34 billion. Issuances out of Taiwan more than doubled from US$1.60 billion to US$4.68 billion in the comparable period.

Among the China bond deals that win The Triple A awards during the review period was from a debut issuer Contemporary Amperex Technology, a supplier of energy storage batteries and lithium battery materials, which raised US$1.5 billion in a dual-tranche offering. It generated one of the largest order books of US$13.5 billion and price tightening for recent primary issuances out of China.

As manifested in different countries across the region, several corporates and financial institutions in China, Hong Kong, South Korea and Taiwan are adapting to sustainable financing strategy in their fund-raising activity. Bank of China, China Merchants Bank and China Construction Bank have issued social, sustainability and green bonds in 2020. In Hong Kong, the outstanding sustainable finance issuers are led by Mass Transit Railway Corporation and Castle Peak Power Company.

The sustainable finance theme was very evident in South Korea with Kookmin Bank showing the way with deals denominated in US dollar, euro and Korean won in 2020. The bank has so far issued US$1.57 billion worth of social and sustainability bonds, including a US$500 million Covid-19 response sustainability bond priced in April. The other Korean issuers embracing this theme and wins The Triple A Awards 2020 include the Korea Housing Finance Corporation, Posco and Shinhan Bank.

ESG theme

“The environmental, social and governance (ESG) theme is here to stay and the trend among the Korean issuers embracing green, sustainability and social type of financing will continue,” says a senior debt capital markets banker. “Kookmin is the first Korean financial group to announce exit from coal financing and more market participants are expressing their commitment towards the ESG principles.”

Over in Taiwan, Far Eastern New Century Corporation arranged NT$3 billion (US$106.30 million) sustainability-linked facilities, featuring an innovative sustainability-linked commercial paper programme structure launched in Asia-Pacific

In terms of the best banks and best advisers, Citi is a big winner as it sweeps the Best bank – Global award in all four markets of China, Hong Kong, South Korea and Taiwan. It also wins the Best corporate and institutional adviser – Global award in Hong Kong, South Korea and Taiwan, with Credit Suisse snaring the accolade in China.

Citic Securities also figures prominently among the winning advisers in China, taking the honours as the Best corporate and institutional adviser – Domestic, Best equity adviser – Domestic and Best M&A adviser.

Credit Suisse distinguished itself as a trusted M&A adviser in South Korea. It was the strategic adviser to SKC’s foray into the global electric vehicle value chain, which involved the divestment of its two non-core assets in order to finance the new growth driver for the company, which include the acquisition of a 100% stake in KCF Technologies for US$1 billion.

Domestic banks and securities companies dominate the winning circle in Taiwan, with CTBC Bank being voted as Best bank and Best loan adviser. Yuanta Securities is selected as Best corporate and institutional adviser – Domestic, Best equity adviser and Best bond adviser – Domestic (NT dollar bond).

Cathay United Bank is a deserving winner as well this year as it is awarded Best bond adviser in Taiwan as it enhances its DCM franchise with its ability to arrange Formosa, NT dollar and Reg S bonds. It has been expanding its footprint regionally within the Greater China and Southeast Asian markets, arranging deals from origination to distribution.

For the complete list of winning advisers, please click here.

For the complete list of winning deals, please click here.

The virtual awards ceremony will be held on 18 March, 2021, please reserve your place by contacting events@theasset.com