“You have the state-owned enterprises come out with new
issues that price virtually on the curve, the concession they
are giving is virtually zero. But Asia’s swelling pension and mutual fund
industries have also created a huge new demand base at home,
elbowing out the Western funds.
PRICED TO PERFECTION
“This only builds up pent-up demand for later on as people
are delaying investing.”
($1 = 6.2051 Chinese yuan renminbi)
“It is good news for issuers, and as a result the bonds are
usually more allocated to Asian investors for the lower returns
they ask for,” she said.
Allocations in some recent cases were filled almost entirely
within Asia. These are chunky issuances but
they have been extremely well-absorbed by the market,” said Nish
Popat, a fund manager at Neuberger Berman.
“Right now, my feel is whatever is left of Asian issues for
outside investors is between 20-30 percent – tops.”
The downside for fund managers is that companies are able to
minimise or even do away with the yield premium that new bonds
typically pay to lure investors.
Asian companies have stepped in to fill the void, accounting
for almost 60 percent of this year’s emerging corporate bond
sales, having raised $70 billion as of the end of April,
according to BNP Paribas. Japanese pension funds are also
investing more in emerging markets.
“Some years ago the syndicates would come to Europe and the
United States peddling these bonds and no broker would ever
close the book before people in these latitudes had a look,” he
Chinese refiner Sinopec, which raised $6.4 billion in five
tranches last month, paid 3 and 5 basis points respectively over
existing five- and 10-year dollar bonds. That’s up from a 51 percent share last
year and a meagre 17 percent in 2008, BNP says.
A banker at a U.S. China’s recent cut in banks’ reserve
requirements alone was seen unleashing 1 trillion yuan ($160
billion) into the economy and markets.
So far so good. Asia-Pacific pension assets will
hit $6.5 trillion by 2020 and overall assets will reach $16.2
trillion, PwC predicted, more than double their 2012 levels.
These volumes have lifted Asia’s weight with bond investors,
with China toppling Brazil as the biggest component of the CEMBI
Broad and Diversified indexes, the benchmark for most investors
in emerging company debt.
Chinese Times Property’s $280 million deal in
March came from an overflowing book worth $1 billion, with 90
percent of the bids from Asia.
The Hong Kong-based banker said Asian funds, familiar with
local borrowers, were willing to take lower yields.
Meanwhile, Russian companies returning to the market will
likely be welcomed by investors.
One reason is that Chinese, Korean and other local investors
are keen to put cash into dollars as their own currencies weaken
and interest rates fall. bank’s bond syndicate desk in Hong Kong
said Chinese investors were cash-rich now and some deals
marketed recently had been placed within hours.
Greg Saichin, head of emerging debt at Allianz Global
Investors, estimated that 60 to 70 percent of the average new
issue in Asia is snapped up by locals.
LONDON/HONG KONG May 17 Emerging corporate bond
funds searching for debt to buy up in the absence of Russian and
Brazilian borrowers have found themselves jostling with a
growing number of cash-rich Asian investors for new issues from
(Editing by Hugh Lawson)
“There is still too much money chasing too few bonds,”
Saichin of Allianz said, adding he had passed on many Asian
bonds which offered no yield concessions.
Bonds from Asian companies, largely Chinese, are dominating
the new dollar issue market now that once-prolific Russian and
Latin American borrowers have been shut out by Western sanctions
on Moscow, a corruption scandal at Brazil’s biggest company
Petrobras, weaker commodity prices and fears of a default in
To compete with local buyers, more and more funds including
his own are opening offices in the region, he said.
“If you are not effectively on the ball with eyes on the
book, by noon you will have missed the bus,” Saichin said
Critics also say investors’ eagerness may be blinding them
to default risk, with coal firm Winsway this month becoming the
third Chinese entity in 2015 to default on offshore bonds.
Asia is already home to huge investors such as South Korea’s
$400 billion National Pension fund and Singapore’s $200 billion
Central Provident fund. For instance last week, Chinese bank CCB took
orders of $7 billion for a $2 billion bond, 88 percent of them
from local buyers.
Reuters has reported that asset managers and banks have been
adding staff in Asia.. But orders for the $2.5
billion five-year issue surpassed $7 billion.
For emerging markets, typically reliant on Western capital,
the rise of a domestic investor base is undoubtedly positive.
In Asia, this is driven by savings pools that are seeing
pension and mutual fund assets grow around 10 percent a year,
according to consultancy PwC
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