G3 bond market defies Brexit, Trump election: who should win The Triple A Best Bond House?
The year may have started slow for the G3 bond market issuance in Asia in 2016, with the first quarter volume down 30.8% from the same period the year before, to US$34.2 billion. But the deal activity soon picked up from the second quarter, and even the unexpected Brexit vote and election of Donald Trump as the US president-elect, failed to dampen the momentum as the market closed the year on a strong note.
Total issuance was estimated to top US$200 billion in 2016 with the Republic of Indonesia making a big splash in early December to raise US$3.5 billion to partly pre-fund its 2017 budgetary requirements.
With such a heavy volume, five banks figured prominently in the race for the best G3 bond house. Bank of America Merrill Lynch, which reorganized its debt capital markets team in Asia-Pacific in 2016, and created a debt solutions unit, was able to capture the sustainable financing theme that attracted a lot of attention during the year. It arranged 10 green bonds out of Asia in 2016, including the US$2.25 billion/500 million euro offering for Bank of China (BoC) – the largest ever international green bond issuance globally – as well as for Asian Development Bank and Development Bank of Japan.
BoC International provided strong competition to the global banks on the back of its origination and execution capability. It was able to leverage on its access to Chinese investors, which was a big trend in 2016. Apart from the BoC green bond, it was also involved in several large transactions such as the US$3 billion multi-tranche offering for Sinopec and the US$3.2 billion additional tier 1 (AT1) preference share for China Cinda Asset Management Company.
Citi also arranged market-defining bond transactions in 2016 across the spectrum of issuers. It participated in bank capital fund raising issuances, particularly Basel III-compliant securities, such as in the US$750 million AT1 capital for DBS Group and the US$300 million AT1 for the State Bank of India. It brought first time issuers into the market such as Glenmark Pharmaceuticals of India and Industrial Bank of China.
A blemish, though, to an otherwise sterling year for Citi, was the pulled deal for Korean Air Lines for US$300 million, which the market chatter attributed to the problems of its embattled affiliate Hanjin Shipping.
Like in the loan syndication business, DBS carries the torch for the homegrown investment banks in the G3 bond market, as it continued to strengthen its franchise in the region. It successfully arranged Reg S and Reg S/144A benchmark transactions. Its competencies include structuring perpetual securities, such as those for Olam International for US$500 million, and CITIC Envirotech for US$355 million.
With an extensive geographic coverage across Asian G3, HSBC managed to maintain its league table leadership again in 2016 – to the extent of becoming boring to many of its competitors. The bank continued to bring a wide array of transactions into the market across the sovereign, financial, and corporate sectors. It was instrumental in bringing into the US dollar bond market more local government financing vehicles from China as they access US dollar funding, such as Tianjin Rail Transit Group, which raised US$500 million in two tranches, and Yunnan Provincial Investment Group amounting to US$300 million.
HSBC was also a driver in sustainable financing acting as structuring adviser on such green bond deals for Link Reit, MTR Corporation and Modern Land (China).
The winner of the Triple A Best Bond House will be revealed on February 28, 2017 during The Asset’s Regional House & Deal Awards Dinner. For more information about the awards ceremony please click here
9 Jan 2017