appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Georgina Lee

Foreign-currency bonds sold by issuers in the Asia-Pacific region (ex-Japan) will continue their decline for the rest of this year, said bankers focused on primary bond issuance.
An absence of offerings from Chinese developers and rising US interest rates sank bond issuances in the first half of the year to the lowest level since 2018.
Issuance of bonds in the so-called G3 currencies, comprising the US dollar, the yen and the euro, declined 34 per cent year-on-year in the first six months of 2022 to US$169 billion, data from Refinitiv shows.
US dollar bonds from Chinese issuers traditionally account for half of Asia’s high-yield bond market, with the country’s embattled developers making up a significant chunk of what are known as junk bonds, or those rated below BBB- by S&P Global and Baa3 by Moody’s.
The absence of offerings from developers has dried up Chinese high-yield bond deals to a mere six this year, down from 72, and will continue to suppress total issuance for the rest of 2022, bankers said.

“I can’t see how issuance can rebound in the second half, when many Chinese issuers cannot refinance through raising bond funding, and investors’ demand for longer term papers beyond 10 years has nearly disappeared,” said David Yim, regional head of debt capital markets for Greater China and North Asia at Standard Chartered.
Many developers will struggle to issue new bonds as a large chunk of their outstanding notes are trading below 50 US cents on the dollar after a slew of defaults and repayment extensions that affected even major home builders such as Sunac China and Zhenro Properties.
Investment-grade issuers, meanwhile, have been put off by the rising costs of dollar funding and have held back from tapping the market, Yim said.
Ten-year US treasuries rose to above 3 per cent in June from 1.6 per cent in January – before being dwarfed by the higher yields paid by the two-year note last week, resulting in an inversion of the yield curve. Such a phenomenon has sunk demand for longer-dated papers, as placing money in shorter term treasuries is returning more than money locked up for 10 years.


An inverted yield curve has also signalled almost every US recession in the past 50 years. The market is expecting the Federal Reserve to increase rates by a full percentage point at its meeting scheduled for July 27. The Fed fund rates target range is currently at 1.5 per cent to 1.75 per cent.
“It has been a very challenging six months for the Asian US dollar credit market,” said UBS CIO, the research unit of the Swiss bank’s global wealth management division, in a report published in June. The return on Asia investment-grade debt is down 9.8 per cent this year because of the change in US interest rates.
Combined with Russia’s invasion of Ukraine and growth concerns stemming from fears of more Covid-related lockdowns in China, issuance for 2022 is likely to fall well below the US$344 billion total Asia-Pacific ex-Japan issuance achieved last year, Yim said.
The shrinking supply this year has come amid a huge wave of redemptions by foreign investors of bonds issued by Chinese firms. The net outflow across all fixed-income funds globally between January and May reached US$9.7 billion, data from funds network provider Calastone shows.
Property sales in China will need to recover for the Asian high-yield market to turn around, according to UBS CIO, which expects sales to bottom out towards the fourth quarter thanks to continuing policy support.
New home sales in early July fell 45.2 per cent to 59,000 units, following an 11.2 per cent drop in June and a decline of close to 46 per cent in May, according to Citic Securities.
“We believe macro uncertainties stemming from persistently high inflation globally and China’s growth recovery will weigh further on the market in the near term,” said UBS report authors Timothy Tay and Devinda Paranathanthri.


How will Japan’s rate increase affect capital flow in global financial markets?

Exchange Fund weighs bigger gold holdings to support Hong Kong’s trading hub plan

Will China’s new local surtax provide relief for its regions’ fiscal headaches?

Private equity’s Fang Fenglei on investing in China, capital market reforms

Bonds

Asian foreign-currency bond issuance falls to four-year low amid Chinese developers’ woes, US rate rises

Many Chinese developers will struggle to issue new bonds after a slew of defaults and repayment extensions. Photo: Reuters

Asia ex-Japan bond funds see highest outflow of the year in May as rate hikes, Ukraine war and Covid hit risk appetite

Investors retreat from Asia bonds as US rates rise. Photo: Reuters 

Asia ex-Japan bond funds see highest outflow of the year in May. Photo: Shutterstock  

Chinese green bond issuers must improve disclosures to ensure growth of sustainable finance market, report says

China’s goal to hit peak emissions by 2030 and reach carbon neutrality by 2060 is boosting the country’s green finance market. Photo: Reuters

Sean Kidney, CEO of Climate Bonds Initiative, said Chinese green bond issuers have to improve post-issuance reporting to increase the appeal of the country’s climate bond market. Photo: Felix Wong

Debt-ridden developer Kaisa’s bonds edge up after firm says it has signed joint venture agreement with state-owned builder, bad asset manager

Trading in Kaisa shares remains suspended after the company failed to submit its annual financial results to the Hong Kong exchange, but a listed property management subsidiary saw its shares surge by 10.3 per cent on Wednesday. Photo: Reuters

Chinese corporate bond defaults likely to continue to increase in 2022, Moody’s says

An Evergrande housing complex in Beijing. The company, China’s biggest developer, has bought itself more time by making last minute payments after a series of asset sales. Photo: AFP

graphic for online First-half 2020 loans by Chinese lenders to Evergrande, including overseas branch loans (billion yuan) China Minsheng Bank Agricultural Bank of China Citic China Everbright Bank China Zheshang Bank Industrial and Commercial Bank of China Shanghai Pudong Development Bank - China Industrial Bank f Jiangxi Bank Shengjing Bank j China Development Bank Nanyang Commercial Bank Bank of Jilin I) China Construction Bank ¯ China Merchants Bank 13.1 12.3 11.3 10.3 9.2 8.1 7.7 6.3 5.5 5.4 3.7 3.5 Bank of Chongqing 2.2 Bank of China VI Postal Savings Bank of China Source: Jefferies 29.4 25.7 SCMP

Business

Banking & Finance

Markets

Mutual Funds

Money

News

China

Money & Wealth

Economy

China Economy

Bonds issued in US dollars, yen and euros by Asia ex-Japan borrowers fell to lowest level since 2018
Analysts see little hope of a recovery in the second half, with troubled Chinese developers shut out of market


An absence of offerings from Chinese developers and rising US interest rates sank bond issuances in the first half of the year to the lowest level since 2018, with little to no recovery in sight.
