During April and early May there was a surge in bond issuance from Chinese firms, taking advantage of strong investor appetite to fund capital expenditure and global expansion plans.

The US$5 billion multi-tranche offering from state-owned State Grid of China was the largest dollar bond offering out of Asia this year. It comprised the following tranches: a US$900 million three-year, a US$1.25 billion five-year, a US$2.35 billion ten-year, and a US$500 million thirty-year. State Grid is expected to use some of the proceeds to help pay for its acquisition of a US$4 billion stake in Brazilian utility CPFL.

China Southern Power also tapped the market, selling US$1.5 billion worth of bonds in two tranches. It sold US$600 million worth of five-year bonds paying 2.75%, and US$900 million worth of bonds paying 3.5%. Bookrunners were UBS, ANZ, Bank of China, China International Capital Corporation (CICC), HSBC and JP Morgan.

China Huarong Asset Management also sold US$2.97 billion worth of bonds in a multi-tranche deal in April.

“The numbers are eye catching,” says a debt capital markets banker, commenting on the level of issuance in April and May. “Chinese supply has been substantial and well absorbed, which shows the positive sentiment of international investors towards China risk.”

In early April there was also a very strong response to a US$3.4 billion benchmark bond offering from China Petroleum Corporation (Sinopec), which will likely be followed by deals from other oil companies in the coming months. Many global oil companies are currently boosting capital expenditure, having made adjustments to lower oil prices – though concerns still remain about the direction of oil prices in 2017.

Moody's assigned an Aa3 rating to the senior unsecured notes, which were issued by Sinopec Group Overseas Development (2017) Limited and guaranteed by China Petrochemical Corporation (Sinopec Group).

The 144A/Reg S issue comprises a US$1 billion 2.375% three-year tranche, a US$1.1 billion 3.0% five-year tranche, a US$1 billion 3.625% ten-year tranche and a US$300 million 4.25% thirty-year tranche. The thirty-year bonds were added to the deal after reverse inquiries.

The Sinopec offering drew final orders of over US$5.4 billion with allocations balanced across Asia, US and EMEA. Central banks and sovereign wealth funds were prominent. Citigroup, UBS, Bank of China, Goldman Sachs, HSBC and ICBC International were joint global coordinators. They were joined as bookrunners by Agricultural Bank of China, Bank of America Merrill Lynch, CCB International, DBS Bank, JP Morgan, Mizuho Securities, Morgan Stanley, Societe Generale and Standard Chartered.

China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC) were absent from the market in 2016, but are expected to make offerings in the coming months.

There is also strong international demand for bank issuers. On April 11 Bank of China issued a huge six-tranche deal denominated in four currencies, with a total equivalent to US$3.1 billion.

There was an A$800 million (US$589 million) five-year floater, a 1.5-billion-yuan (US$217 million) three-year offshore, a 500-million-euro (US$546 million) three-year floater, a US$650 million three-year floater, a US$750 million five-year bond, and a US$300 million ten-year bond.

As a new institution which only began operations in early 2016, the AIIB has yet to tap the international bond markets. But appearing on a panel at the Asian Development Bank meeting in Yokohama, AIIB Treasurer Soren Elbech said it would likely make its debut this year.

AIIB is expected to rapidly establish itself with investors in sovereign supranational and agency bonds, who are currently showing tremendous appetite for traditional issuers, and will welcome a new name for their portfolios.

On April 27 the ADB priced its largest ever dollar benchmark deal, selling US$4 billion worth of three-year bonds.

“This transaction breaks our previous record for the largest ever US dollar global benchmark issue from February, when we issued a US$3.75 billion five-year, and sends a very strong message to our stakeholders ahead of ADB’s 50th Annual Meeting in Yokohama”, commented ADB treasurer Pierre Van Peteghem.