Asian Dollar Bond Sales Seen Slowing After China Record Binge
Asian dollar bond issuances have multiple speedbreakers ahead.
(Bloomberg) -- Asia’s dollar bond issuance looks set to lose momentum after a Chinese-led sales blitz this year, in a development that could help assuage concerns about mounting debt loads.
With a record issuance of about $233 billion so far this year, Bank of Singapore Ltd.’s Todd Schubert said many borrowers have already tapped the market for their debt refinancing needs. He also flagged potential volatility ahead like the U.S. elections that may slow sales.
Most bankers expect Asian issuers outside Japan to sell about $84 billion or less of dollar notes in the final four months of 2020, according to two thirds of respondents in a survey of 15 arrangers of these deals. That means the total annual tally may fall short of the $326 billion record set in 2019, Bloomberg-compiled data show.
As China’s economy continues to recover, an expected slowdown in bond sales from the country and the rest of the region could prove a relief to policymakers mindful of the still unresolved debt bubble following the global financial crisis. For one, Beijing has in recent months gradually shifted its policy focus back on instilling financial discipline by taming expectations for aggressive monetary easing and allowing more debt defaults to occur.
“Given that many of the Chinese companies have come to the market already, we would expect issuance to slow down a bit over the next several months,” said Schubert, head of fixed-income research at Bank of Singapore, though high-yield issuers outside of China who were not able to access the market earlier in the year will remain active and opportunistic.
Chinese firms dominated issuance in a summer of record sales as they took advantage of lower borrowing costs prompted by central bank support. Some of the sizable deals include Baidu Inc.’s $1 billion offering and Tencent Holdings Ltd.’s $6 billion debt sale. Indian commodities giant Vedanta Resources Ltd.also joined the fray with a $1.4 billion issuance of amortizing notes.
With firms having serviced their upcoming maturities and a seasonal slowdown in December, issuance in the primary market may start weakening going forward.
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With assistance from Bloomberg