The issuance volume of G3 bonds in Asia, excluding Japan and Australia, rose 18.1% to US$122.89 billion in the first half of 2024, compared to a year earlier, as Chinese issuers were more active in accessing the market. Activity in the high-yield space picked up, while ESG-related bonds continued to generate interest from both issuers and investors.

Figures supplied by LSEG showed that volume out of China amounted to US$32.65 billion in January-June 2024, up from US$23.66 billion in the same period a year ago. While banks and other non-financial institutions spearheaded the deal flow, Chinese corporates, such as China Huaneng Group, China Hongqiao Group, and Shandong Hi-Speed Group, also tapped the G3 bond market to meet their funding needs.

But it was issuers out of South Korea that topped the league table with a total issuance volume of US$37.14 billion, up 19.3% from US$31.14 billion a year earlier, as companies raised funds for overseas expansion and to meet their capital requirements. Among the biggest deals printed during the period were those for LG Energy Solution amounting to US$2 billion, SK hynix US$1.5 billion, Korea National Oil Corporation US$1.4 billion, Korea Electric Power Corporation US$1.2 billion, and Hyundai Capital Services US$1 billion.

The Republic of Korea also tapped the US dollar bond market for the first time since October 2021, pricing on June 26 a US$1 billion trade for five years. The deal attracted an order book of US$1.24 billion from 44 accounts with 60% of the paper sold in EMEA, 23% in Asia-Pacific and 17% in the Americas.

Hong Kong was the third biggest issuance market in January-June 2024 at US$11.16 billion, but this represented a 33.1% decline from US$16.67 billion in the comparable period a year earlier. Indonesia saw its issuance volume rose from US$4.41 billion to US$7.21 billion, led by the sovereign, which tapped both the US dollar and Samurai bond markets.

Issuance activity out of Singapore rose from US$4.62 billion to US$5.69 billion, while issuances out of India also climbed from US$3.64 billion to US$5.26 billion, the Philippines up from US$3.02 billion to US$4.26 billion, and Thailand up from US$600 million to US$1.176 billion.

India leads high yields

There was noticeable activity in the high-yield bond market with the volume rising to US$6.38 billion in the first half of 2024 from US$1.37 billion a year ago. Indian issuers dominated the deal activity with issuances totalling almost US$3 billion. Leading the issuers were Shriram Finance which raised US$750 million, IRB Infrastructure Developers US$540 million, Indiabulls Housing Finance US$350 million, and Manappuram Finance US$300 million.

Other high-yield issuances came out of Hong Kong totalling US$1.68 billion, Mongolia US$512 million, Singapore US$500 million, Indonesia US$350 million, and China US$340 million.

ESG-related G3 bond issuances rose 5.6% to US$28.90 billion in the first half of 2024, from US$27.35 billion in the corresponding 2023 period, according to LSEG. China was the leading issuer with a total volume of US$12.20 billion, which was more than twice the US$5.36 billion recorded in January-June 2023.

South Korea, which previously led the way in the issuance activity, saw its volume decline from US$9.80 billion to US$8.72 billion during the same period. It was Hong Kong, though, that exhibited the biggest drop in the issuance of ESG-related bonds to US$1.28 billion in the first half of this year, compared with US$8.15 billion a year ago, with the absence of offerings from the HKSAR, Airport Authority Hong Kong and Hong Kong Mortgage Corporation.

Meanwhile, the volume of Asia local currency bonds, excluding those from Japan and Australasia, dropped to US$1.72 trillion equivalent, from US$1.77 trillion a year ago.

In other funding avenues, funds raised in the equity capital markets (ECM) in Asia, outside of Japan and Australasia, plummeted to US$72.76 billion in January-June 2024 from US$108.95 billion in the same period last year, according to LSEG. India saw its deal-making activity more than double during the period with the volume amounting to US$29.70 billion, compared with US$12.05 billion in the first half of 2023. In contrast, China, buffeted by a challenging market environment, saw its ECM deal volume plunging to US$26.56 billion from US$78.52 billion during the same period.

IPO market weak

The sharp decline can be attributed to the weak IPO (initial public offering) market, as the deal value fell from US$38.47 billion to US$13.78 billion. The amount of IPOs out of China fell from US$31.68 billion to US$5.81 billion, while that from India surged from US$2.25 billion to US$4.62 billion.

According to LSEG, the Indian IPOs included those for Bharti Hexacom with proceeds of US$513.25 million, Aadhar Housing Finance (US$359.17 million), Go Digit General Insurance (US$313.96 million). Bharat Highways InviT (US$301.78 million) and Sustainable Energy Infra Trust (US$272.48 million).

Issuance of convertible bonds (CB) declined slightly from US$13.32 billion in the first half of 2023 to US$12.98 billion this year. Headline CB deals included those from Chinese technology companies such as the US$5 billion offering from Alibaba Group Holding, US$2 billion each from Lenovo and JD.com, and US$1.5 billion from Trip.com.

S&P Global Ratings, in a note issued on June 16, attributed the issuers’ appetite for CBs to depressed share prices, high interest rates, and a lack of supply of offshore Chinese bonds. It explains: “High interest rates and robust investor demand create favourable conditions for convertible notes. Strong investor demand for such issuance results in tighter conversion premium and lower coupons. Issuers can somewhat offset share dilution by entering capped-call transactions, for a cost. Issuers can further reduce share dilution – or reverse it completely – by buying back shares at a price below the conversion price of the notes.”

In another funding avenue, the syndicated loan market showed a downtrend in January-June 2024 with the volume amounting to US$181.61 billion, compared with US$292.22 billion in the same period last year. Several markets showed steep declines in volume: China fell from US$137.05 billion to US$68.75 billion, Hong Kong was down 10.7% at US$39.11 billion, Singapore was down 29.2% at US$24.31 billion, India fell 14.7% to US$13.59 billion, the Philippines dropped 44.4% to US$2 billion, Indonesia was down 90.7% at US$1.92 billion, and Vietnam fell 55.4% to US$1.91 billion.

The decline in volume came even as the issuance of ESG-related loans rose by 29.4% to US$45.97 billion in January-June 2024, from US$35.51 billion a year ago. Singapore was the biggest issuer with US$14.90 billion, followed by Taiwan with US$12.38 billion and Hong Kong with US$11.60 billion.