Asia G3 bond issuance sees scorching start to 2020
Volume reaches US$46.30 billion in January, the highest for the month in over 10 years, but coronavirus outbreak might halt further momentum
3 Feb 2020 | Chito Santiago

Asian G3 bond issuance picked up in January where it left off in 2019 as the flurry of deals into the new year saw the volume, outside of Japan and Australasia, reaching US$46.30 billion, the highest for the month in over a decade.

This follows a record-breaking year in 2019 when the total issuance amounted to US$349.47 billion, exceeding the previous high of US$333.27 billion in 2017. But whether such a plethora of transactions will continue is now doubtful with the spread of the dreaded coronavirus.

According to Refinitiv, the January amount exceeded the previous high of US$39.49 billion in January 2018 and it represented an increase of 35.6% from US$34.14 billion in January 2019. This comes even as the number of deals fell in January 2020 to 77 from 82 in the same period last year.

China accounted for 41.5% of the issuance with US$19.21 billion from 42 deals, up from US$14.15 billion from 38 deals in January 2019. Indonesia manifested a strong surge in volume with US$5.43 billion from eight deals in January this year, compared with just US$949.4 million from only two deals a year ago, driven by the sovereign’s dual currency offering of US$2 billion and one billion euros (US$1.11 billion).

The high-yield bond sector also continued its robust pace of issuance in January, says Refinitiv, with the volume reaching over US$18.27 billion from 34 deals, up from US$13.14 billion from 33 deals in January 2019. China accounted for more than half of the volume at US$9.42 billion, though it represented a decline from US$9.79 billion in January last year.

Hong Kong saw its high-yield bond issuance more than tripled from US$1.50 billion to US$4.79 billion during the same period, while that from Indonesia climbed from only US$174.4 million to US$2.32 billion. Among the Indonesian corporates that accessed the high-yield bond market during the month were Lippo Karawaci, which issued bonds worth US$325 million, and Bayan Resources, whose inaugural offering amounted to US$400 million.

Chinese corporates, mostly property developers, actually priced some of the largest transactions during the month, with Tianji Holding Limited, through Scenery Journey Limited, printing a US$4 billion offering in dual tranches equally split at US$2 billion each. Frequent issuer China Evergrande Group was back in the market in January with a US$2 billion deal, likewise a dual-tranche issuance worth US$1 billion each.

A Moody’s Investors Service report issued on January 23 says refinancing will continue to drive the high-yield bond issuance as nearly 75% of the US$77 billion of the rated bonds maturing through 2022 are for Chinese developers. “Although maturities of the South and Southeast Asian corporates are light in 2020, some companies are likely to refinance ahead of the maturity wall in 2022,” it says.

Including unrated issuance, Moody’s points out that debt maturities for rated high-yield companies climb to US$234 billion – considering the earliest exercisable date of put options – with 20 companies, primarily China-based ones, accounting for around 50% of the total maturities. “Upcoming maturities should be manageable for most high-yield companies in 2020,” it adds.

A DBS economics and strategy report issued on January 31 says markets are bracing for an extended period of disruptions in China owing to the coronavirus outbreak. It notes Chinese bond issuances have come to a standstill in the past week after a scorching start to 2020. Asset markets have also been pressured, with credit spreads widening noticeably for Chinese bonds.

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