Asian companies and governments have tapped international bond markets at a record pace this year, with borrowers in the region rushing to take advantage of demand from yield-starved investors.
Issuers in Asia, excluding Japan, have sold $354bn worth of dollar bonds in the year to date, up 13 per cent from a year ago and a record high for the period, according to data from Refinitiv.
The figures are a sign that borrowers in Asia, where default rates remain low, are benefiting from a wave of loose monetary policy in Europe and the US to combat the economic havoc wrought by the pandemic.
The rush of bond sales has been driven in part by a surge of corporate issuance from China, where the country’s economic recovery from the virus has caught the attention of global investors eager for returns.
“The hunt for yield has enabled corporate borrowers in Asia to lock in favourable rates,” said Haitham Ghattas, head of capital markets for Asia Pacific at Deutsche Bank. “We’re as busy as we’ve ever been over the summer months” and autumn.
Mr Ghattas said pent-up Asian issuance kept at bay early in the year by the coronavirus disruption had come flooding back in the second half as government and corporate issuers — particularly from China — rushed to finish dollar debt deals ahead of the US presidential election.
“The robustness of the market is very encouraging as it gives corporates more confidence to rely on funding from the international debt capital market more consistently going forward,” he said.
Bankers said dollar bonds sold by issuers in the region could hit a new high for full-year 2020, surpassing the record $377bn in 2017, if the pace of issuance held up.
Low interest rates in markets such as the US and Europe prompted China’s finance ministry to sell bonds totalling $6bn directly to US investors in October for the first time. The deal drew orders worth more than $27bn with the yield on the 10-year tranche at about 0.5 percentage points above the equivalent US Treasury.
“Most countries in the region are pretty much done for this year,” said David Yim, head of debt capital markets for Greater China and North Asia at Standard Chartered.
But “there are still plenty of [Chinese] issuers that for different reasons have funding left to do post-US election”, Mr Yim added. “We’re going to be busy all the way to the year’s end.”
Recent big-ticket issuers from China include state-run Sinochem, one of the country’s two largest chemicals groups, and Cofco, its largest food processor, which both sold $1bn worth of debt on foreign markets in October.
Chinese technology groups have also been drawn into the market, with food delivery outfit Meituan selling a $2bn bond.
Paul Lukaszewski, head of corporate debt for Asia and Australia at Aberdeen Standard Investments, also pointed to steady default rates in Asia, compared to higher rates of default in the US, despite the impact of Covid-19.
“Despite this massive stress event, Asia’s defaults have basically barely risen above the long-term average,” he added. “As a global investor, if you’re not looking to Asia for yield, you’re basically leaving returns on the table.”