The issuance of G3 bonds in Asia, outside of Japan and Australia, remains robust as the volume reached US$269.19 billion in the first nine months of 2019, representing an increase of 28.1% from US$210.19 billion in the same period a year ago. The amount nearly matched the entire 2018 issuance volume of US$273 billion.

The volume was the highest for a nine-month period during the past 10 years, according to figures from Refinitiv on September 30, and even exceeded the US$248 billion tally posted in the record-breaking year in 2017 when the total issuance amounted to US$334 billion for the whole year. In September alone, the total volume was US$34.74 billion, up from US$25.69 billion in September 2018.

“A lot of the deals were for refinancing,” says a senior banker. “Borrowing costs were dropping, so the issuers even in the BB credit spectrum were locking in five-year money, for instance. They were building buffers, which is actually healthy for the market as they provide them with the cushion to withstand the stress period until the market settles down.”

What helped underpin the issuance volume, amid the challenging market backdrop, was the strong recovery in the high-yield space where the total offerings amounted to US$67.42 billion during January-September 2019, or more than double the US$31.77 billion volume in the same period in 2018.

“There were concerns last year on refinancing by property companies,” the banker points out. “That wall of refinancing was met with a tidal wave of demand and liquidity, and that liquidity was not close to drying up.”

According to Refinitiv, China accounted for half of the total G3 bond issuance so far this year, with US$135.39 billion, up 47.3% from US$91.90 billion in the first nine months of 2018. The volume from Hong Kong was up 8% to US$42.70 billion, while that from South Korea rose 26.6% to US$23.30 billion. India registered the biggest increase as its issuance volume surged 238.8% to US$17.90 billion.

“The offshore bond market offers the Indian issuers the opportunity to raise bigger deal sizes and investor diversification,” an Indian banker points out. “In some cases, they were able to secure slightly better pricing than in the domestic market.”

Chinese internet-based technology company Tencent Holdings printed the largest G3 bond deal so far this year in Asia, outside of Japan and Australia, with a US$6 billion offering comprising five tranches.

This was the company’s largest offshore bond transaction to date and it achieved negative new issue concessions across all the tranches. The order book was 4x oversubscribed with US$23.9 billion worth of demand from high-quality investors.

By country, China was also the biggest issuer in the high-yield space with the amount reaching over US$44.47 billion during January-September 2019, or more than double the US$17.12 billion in the same period a year earlier.

Hong Kong was the next biggest issuer with US$8.84 billion (up 78%), followed by India with US$7.68 billion (up 326.9%). On the other hand, Singapore recorded lower issuance volume with US$1.91 billion (down 33.4%), with Indonesia following suit with US$1.73 billion (down 47.9%).

“There were issuers from Indonesia which failed to tap the market because their spreads have widened,” the banker says. “What they do was to go back to the loan market to raise their funding requirements.”

The Chinese property companies – the likes of China Evergrande Group, Country Garden Holdings and Shimao Property Holdings - were the usual frequent issuers of high-yield paper, with Indian issuers such as Vedanta Resources and Greenko Solar also accessing the market to raise capital.