Best deals defy late-cycle worry as top advisers win awards

In part one of The Asset country awards, the best deals and advisers in north Asia are revealed

“It has been a very good year for the debt business – the volumes in 2019 are up significantly and the investors also made money,” a senior banker tells The Asset team during a pitch meeting conducted as part of the evaluation process for The Triple A Country Awards 2019. “It is an issuer market and this trend is likely to continue.”

Indeed, the G3 bond market is running ahead of the record-breaking year of 2017 when the volume in Asia, outside of Japan and Australasia, reached a new high of US$334.41 billion. By all indication, this is likely to be eclipsed in 2019 as the volume has already reached US$322.77 billion as of November 15, according to figures supplied by Refinitiv, representing an increase of 32.6% compared with US$243.36 billion in the same period a year ago.

The turnaround in the US interest rate expectation at the start of the year has come a long way in terms of fueling the deal flows. “That single factor outweighs everything else,” the banker adds. “The investors are less concerned about other things because they know that if the rates are headed down, they are going to make money.”

As in the previous years, China accounts for the bulk of the G3 bond issuance this year with US$165.73 billion for a 51.3% market share as of November 15, up from US$107.89 billion (44.3%) in the same period of 2018. “The Chinese are more pragmatic issuers – when there are windows of opportunities, they take the money off the table,” notes another banker. “These markets are not always going to be there, so when the market conditions are constructive, they take it and get the deals done.”

Hong Kong and South Korea also recorded higher G3 bond issuances this year with volumes of US$48.12 billion and US$27.04 billion respectively, representing increases of 12.5% and 23.2%, respectively, from the same period in 2018. 

The change in market tone also saw the proliferation of what the banker describes as more aggressive deals being done this year as manifested by the strong growth in high yield issuance. At the same time, the issuers have managed to stretch the tenors, considering that there was an aversion to duration last year.

The robust issuance in the high yield space helped drive the G3 bond volume in 2019, with US$78.08 billion worth of paper printed as of November 15, according to Refinitiv, compared with US$38.98 billion in the corresponding period of 2018.

China is more dominant this year in the high yield bond market as it accounted for US$50.67 billion – or 64.9% - of the total issuance up to November 15. This also represented a surge of 175.5% from last year’s amount of US$18.39 billion.

The Chinese real estate sector is by far the largest high yield issuer in the region and there were a large number of these issuers that come to the market – a number of them more frequently – this year. “A lot of the issuance activity was front-loaded in the first half of the year,” notes yet another senior banker.

The IPO market, on the other hand, was subdued in Asia, outside of Japan and Australasia, with the volume down 20.7% to US$55.78 billion as of November 15 this year, compared with US$70.33 billion in the corresponding period a year ago.

However, there were some Hong Kong IPOs that stood out amid the market backdrop, rewarding investors as they continue to trade well above their offer prices as this article was published. These include China East Education Holdings, the largest IPO globally in the education sector, which raised US$632 million in June; Jinxin Fertility Group, the first healthcare service IPO on the Hong Kong Exchange since January 2018, which raised US$447 million, also in June; and Luckin Coffee, one of the largest US ADR IPOs in 2019 and the first US listing of a Chinese coffee company, which raised US$695 million in May.

Meanwhile, the convertible bond market recorded a sharp increase this year with US$46.76 billion worth of deals, or almost double last year’s tally of US$24.38 billion.

Sustainability and green bonds figured prominently in this year’s issuance activity, particularly in Korea, and bankers expect that these asset classes will be a norm in the debt market going forward. “There has been a lot of concern around environmental and sustainability issues, and more investors are getting focused on these themes. Issuers are likewise getting focused on these types of bonds from the financing perspective,” the first banker says.

LG Chem, Kookmin Bank, Mirae Asset Daewoo, Korea Housing Finance Corporation and Woori Bank bannered this year’s landmark transactions out of Korea. In China, the deals that stood out were China General Nuclear Power Corporation’s US$600 million green bond, Huatong Group’s 270 million yuan (US$38.37 million) poverty alleviation bond, ICBC’s US$2.2 billion equivalent green Belt and Road interbank regular cooperation bond, China Everbright Greentech’s HK$1 billion green syndicated facility, and Shenzhen Energy Nanjing Holding’s 1 billion yuan in green asset-backed notes.

Hong Kong printed its inaugural green bond in May amounting to US$1 billion as it seeks to become a green financial hub in Asia, while Wheelock arranged the first sustainability-linked loan in Hong Kong amounting to HK$2 billion for five years. The margin for this facility is linked to the company’s ESG score in the annual ESG Risk Rating Report, measured and published by Sustainalytics.

Taiwan also has its share of the sustainability and green debt transactions, with a green syndicated revolving loan facility for Orsted amounting to NT$25 billion (US$820 million) to finance an offshore wind farm project and a NT$2 billion sustainability-linked loan for AU Optronics that provides attractive financing terms if certain sustainability targets are met. Societe Generale became the first foreign bank to issue New Taiwan dollar-denominated green bonds amounting to NT$1.6 billion.

The other deals that defined the capital markets in North Asia in 2019 include the inaugural bond transaction by the Asian Infrastructure Investment Bank amounting to US$2.5 billion, the HK$25.2 billion credit facilities for the privatization of Hopewell Holdings, and the largest-ever high yield bond for a Macau gaming company for MGM China Holding amounting to US$1.5 billion.

In terms of best houses and advisers, Citi was voted as the Best bank – Global in China, Korea and Taiwan, while HSBC was named Best bank – Global in Hong Kong. The awards for Best bank – Domestic go to China Construction Bank in China, Hang Seng Bank in Hong Kong, Shinhan Bank in Korea, and CTBC Bank in Taiwan.

Citi was a big winner in Korea, scooping the awards for Best corporate and institutional adviser, Best equity adviser, and Best bond adviser. Credit Suisse was selected as the Best M&A adviser in China and Korea. In Hong Kong, DBS punches above its weight as a loan adviser as it was involved as an anchor bank in nine of of the top 10 deals by deal size, in Hong Kong and Macau on the way to winning the Best loan adviser.

For the complete list of Best banks and advisers, by country/territory, please click here.

For the complete list of Best deals, by country/territory, please click here.

To join the dinner celebration, please contact events@theasset.com.

Date

22 Nov 2019

Channel

Capital Markets

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