By Lianting Tu
SINGAPORE, Sept 12 (IFR) - With more than a quarter of 2014remaining, Asian issuers have already sold more bonds indollars, euros and yen this year than ever before, takingadvantage of easy monetary policies to lock in financing at lowfixed rates.
Asian issuers, excluding Japan and Australasia, have raisedUS$143.6bn, with US$1bn of new issues on Thursday night takingthe total comfortably past last year's US$142.8bn record,according to Thomson Reuters data.
International bond sales from Asia have now hit a record forthree years running, and have doubled since 2009. Volumes forthe following years are likely to remain high as earlier dealsmature and are refinanced with new bonds, market participantssaid.
"The growth of Asia's credit markets continues apace,helping underpin the region's economic expansion", Alexi Chan,head of debt capital markets for Asia Pacific at HSBC,said by email. "We are seeing unprecedented levels of globalinvestor liquidity focused on Asia."
Investors with cash to invest are seeking out Asia asgeopolitical tensions in Europe and the Middle East have madethem wary of investing in those regions. Investors who fledrisky assets in the US earlier this year also are looking formore generous returns elsewhere.
"Asia has been attracting steady inflow as a relativelystable destination and Asian credits still offer a yield pick-up[compared to similar credits in the US]," said a portfoliomanager from a major US hedge fund.
MORE TO COME
Bankers say bond sales are heating up again after a quietsummer, so the final total for 2014 could far exceed lastyear's. Deutsche Bank, for example, expects Asian companies willsell another US$25bn of bonds in the major G3 currencies thisyear.
"[Financial institutions] will be the largest contributorfor the rest of the year, and we are going to see a healthy clipof high-yield corporate issuances from Indonesia, India andChina. Also there is a well-defined pipeline from South KoreaIG," said Herman van den Wall Bake, head of fixed income capitalmarkets for Asia at Deutsche Bank.
The action started right away in September with US$4.74bnsold in the first week alone. Expectations are new issue volumewill remain brisk this month as some market participants predictthe monthly total alone will exceed US$20bn.
BASEL BONDS
Bank capital, especially Basel III-qualifying offeringsfrom China, is likely to account for the bulk of the new issuesfor the rest of the year.
Bank of China and ICBC are preparingto sell a combined US$12.2bn in Basel III-compliant AdditionalTier 1 securities in the offshore market. Fitch Ratings expectsUS$20bn in AT1 and Tier 2 capital to be issued by the big fiveChinese banks by the end of the year, both onshore and offshore.
Indian banks are also expected to tap the offshore market,but for senior bonds instead of Basel III-eligible capital.Indian Bank and Allahabad Bank are planningto raise about US$500m each while UCO Bank has alsohired banks for a Reg S-only deal.
CORPORATE PIPELINE
In Korea, many of the frequent issuers are likely to tap themarket again before the end of the year, a Singapore-based DCMbanker said. The growing pipeline includes Korea Hydro & NuclearPower, Hana Bank, Korea Expressway and Korea Western Power.
High-yield borrowers, which have been relatively quiet thisyear, are also likely to fill their funding requirements in thefollowing months while interest rates remain conducive.
Investment-grade issuers, meanwhile, may take a breatherafter a hectic financing schedule earlier this year.
Excluding financial institutions, Asian corporations havealready raised US$28.8bn more in G3 bonds this year than lastyear at this time (US$114.8bn).
"We don't see imminent refinancing needs from IGcorporates," Deutsche's Bake said. "Many of them are likely tokick the ball forward to the first quarter of next year in orderto defer negative carry closer to their actual refinancingneeds. We believe most of the IG corporate funding this year isbehind us." (Reporting By Lianting Tu. Editing By Abby Schultz.)
HSBC Holdings (HSBA)