Market Overview and Highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in First Quarter 2014

Total issuance this year is currently at USD 39.67 billion (bn) as of March 31; issuance is ahead quarter-over-quarter (qoq) from 4Q’13 (USD 29.07bn) but down 13.7% year-over-year (yoy), inclusive of high grade (HG), high yield (HY), and unrated deals. The year started off strongly, as the recently upgraded sovereigns (the Philippines and Indonesia), together with Chinese issuers, contributed to a strong January but the volume of issuance gradually slowed, as a combination of factors including but not limited to a) concerns around a Chinese economic slowdown and worries about the country’s banking system, b) continued outflows out of the Emerging Market (EM) space and finally c) lingering fears of rising interest rates (although that hasn’t yet occurred) following the Federal Reserve’s (Fed) decision to continue tapering at a steady pace throughout 2014.

Key trends in Asia (ex-Japan, Australia and New Zealand) G3 & LCY bond issuance

For the first quarter 2014, total G3 issuance stood at USD 39.67bn, with HG transactions accounting for USD 28.54bn, HY issues accounting for a total of USD 8.26bn, and unrated issues accounting for 2.87bn. China has been by far the largest issuing country in the first quarter, accounting for a total of USD 13.18bn of the USD 39.67bn in G3 issuance seen so far in 1Q’14, with USD 7.05bn and USD 5.50bn in HG and HY deals, respectively, priced from China alone. South Korea continues to remain second with USD 10.35bn in issuance, followed by Indonesia with USD 4.26bn in issuance.

Overall G3 debt outstanding in the region stood at USD 561.65bn, a growth of 2.4% qoq. High grade debt accounted for the bulk of total outstanding debt at USD 355.84bn (a 3.3% growth qoq), followed by HY debt at USD 138.76bn (a growth of 1.4% qoq) and NR debt at USD 67.05bn (a decline of 0.4% qoq). China (with USD 131.0bn), South Korea (with USD 120.9bn) and Hong Kong (with USD 79.8bn) were the three countries with the largest shares of G3 debt outstanding. In terms of ratings, within the HG space, deals rated A+ (USD 103.7bn) accounted for the largest share of debt outstanding, while NR deals (USD 67.1bn) and BB+ transactions (USD 60.3bn) dominated the deals outstanding in the HY space. By sector, sovereigns with a total of USD 144.5bn accounted for more than a third of outstanding G3 paper, with financials (USD 133.2bn) second. Finally, deals with remaining tenors of 5 years or less (USD 223.6bn) accounted for the bulk of total Asia (ex-Japan, Australia and NZ) debt outstanding.

Total Issuance & Outstanding – G3 and LCY for Asia (including Japan, Australia and New Zealand)

Total HG G3 issuance in Asia (including Japan, Australia and New Zealand) stood at USD 116.46bn in the first quarter of 2014, a growth of 11.6 percent qoq (USD 104.39bn) but a decline of 12.6% yoy (USD 125.35bn). Total HG G3 issuance in Asia (including Japan, Australia and New Zealand) was USD 92.29bn in the first quarter of 2014, a growth of 24.6% qoq but a decline of 0.8% yoy. HY issuance was USD 8.84bn in the first quarter of 2014, a growth of 2.7% qoq but a decline of 36.3% yoy. Unrated G3 issuance in Asia was USD 15.33bn in the first quarter of 2014, a decline of 29.4% qoq and 42.0% yoy. Outstanding G3 debt, including developed market Asia, stood at USD 11.76bn at the end of first quarter 2014, a growth of 0.9% qoq, with growth in HG debt (USD 8.50tn, 4.5% growth) but declines in HY (USD 187.8bn, a 0.7% decline) and unrated debt (USD 3.067tn, a 7.7% decline).

Finally, turning to LCY debt issuance, total HG issuance stood at USD 368.73bn in the first quarter of 2014, while HY issuance and unrated issuance was USD 1.05bn and 159.03bn, respectively, over the same period.

Total Issuance & Outstanding – Domestic CNY issuance

Total domestic CNY issuance stood at USD 105.06bn in the first quarter of 2014, a decline of 38.1 percent qoq (USD 169.81bn) and 54.0 percent yoy (USD 228.42bn). By tenor, 71.0% of first quarter issuance (USD 74.54bn) would mature in five years or less, followed by the 5 – 7 year bucket (USD 29.58bn). By sector, finance led issuance totals (USD 33.8bn), followed by construction (USD 22.68bn).

Outstanding domestic CNY debt stood at USD 4.60tn at the end of first quarter 2014, with sovereigns leading totals (USD 2.30tn), followed by financials (USD 1.16tn).

About the Report

Done in partnership with ASIFMA, the Asia Credit Report is a quarterly report on the trends and statistics of the Asian bond market, including both the investment grade and high yield bond market. Additional statistics on the G3 and CNH markets are also included.

For more information on ASIFMA’s efforts in Asian fixed income, please visit ASIFMA.

Credits

ASIFMA

• Executive Director, Fixed Income: Vijay Chander

SIFMA Research

• Managing Director, Head of Research: Kyle Brandon
• AVP: Sharon Sung