All Is Not Lost for Poland's Troubled Corporate Bond Market
(Bloomberg) -- Investors from Canada and Asia may offer a much-needed relief for Poland’s fledgling corporate bond market, hammered by the country’s largest corporate default and scandals that undermined trust in its banking watchdog.
With global growth set to fizzle amid rising trade tensions, a unit of Canada’s largest lender, Toronto-Dominion Bank, is looking to invest in Polish bonds to capitalize on the nation’s fast-expanding economy.
“We have been moving to other parts of the world and are considering local bonds in various countries,” said Greg Kocik, Toronto-based managing director at TD Asset Management, who oversees C$5 billion ($3.7 billion) in high-yield bonds. “What attracts us most to places such as Poland is a relatively high rate of GDP growth as well as pent-up demand for some services or goods which may not be as saturated as it is in some developed markets.”
Support may also come from the east. Investors from Asia have for years been active buyers of Poland’s local-currency sovereign debt and some have also bought the euro-denominated covered bonds issued recently by local lenders, according to Piotr Dmuchowski, head of institutional sales at HSBC Bank Polska SA.
“Some of them are actively looking at other Polish issuance as well,” Dmuchowski said. Meanwhile, Asian investors are attracted by strong economic fundamentals in a market that offers diversification for their portfolios. “New bonds from large issuers would probably be their first choice.”
Appetite from abroad can’t come at a better time. Trading in the secondary market has been thin for years, with investors preferring to buy and hold notes to maturity. Things got worse this year, with demand for domestic bonds tumbling as local mutual funds keep on hemorrhaging cash at a pace last seen in the aftermath of the global financial crisis.
Redemptions were triggered by the collapse of debt collector GetBack SA earlier this year and intensified last month after a corruption scandal that led to the resignation of the head of the nation’s financial regulator.
New issuance has been dominated by banks this year and there were only a few corporate bond sales of over 100 million zloty ($26 million). CTL Logistics Sp. z o.o. postponed a sale of 200 million zloty of notes, which would have been the biggest local-currency corporate bond in the second half of the year.
Among deals that could take place in the coming months, Cyfrowy Polsat SA favors issuing local-currency bonds to refinance 1 billion zloty of securities.
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