Market Overview and Highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in Third Quarter 2015

Total issuance in 3Q’15 came in at USD 26.4 billion (bn) as of September 30, down 58.2% quarter-over-quarter (qoq) from 2Q’15 (USD 63.3bn) and down 34.9% year-over-year (yoy), inclusive of high grade (HG), high yield (HY), and unrated deals. Year to date, issuance was USD 139.2 billion, comprised of USD 114.4bn HG issuance, USD 12.3bn HY issuance, and USD 13.4bn unrated issuance. General weakness in EM currencies including those of EM Asia, driven by a combination of USD strength and the renminbi devaluation, together with idiosyncratic factors (such as in the case of the MYR), have made Asian onshore issuance cheaper relative to offshore – driving this decline. In addition, a decline in risk appetite towards EM (and Asian) debt on the part of foreign investors and weakness in the commodity cycle, weighed on regional issuance. That said, Asian debt issuance volumes have fallen considerably less than elsewhere in EM (Brazil, for instance, has been especially hard hit).

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

For the third quarter 2015, total G3 issuance stood at USD 26.4bn, with HG transactions accounting for USD 21.4bn, HY issues accounting for USD 1.5bn, and unrated issues accounting for 3.5bn. China remains the largest issuing country in the third quarter, accounting for a total of USD 16.8bn, or 63.6%, of G3 issuance in 3Q’15, while USD 14.7bn and USD 770.3mn in HG and HY deals, respectively, were priced from China alone. South Korea continues to remain second in issuance volume with USD 3.5bn, followed by Indonesia with USD 1.7bn in issuance.

Finance remained the largest sector of G3 issuance in the third quarter (USD 10.2bn), followed by transportation (USD 3.1bn, and real estate (USD 2.5bn).

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

Total G3 issuance in Asia (including Japan, Australia and New Zealand) stood at USD 92.2bn in the third quarter of 2015, a decline of 25.0% qoq and 26.2% yoy. Total HG G3 issuance in Asia (including Japan, Australia and New Zealand) was USD 54.0bn in 3Q’15, a decline of 34.9% qoq and 34.0% yoy. HY issuance was USD 5.9bn in 3Q’15, an increase of 20.1% qoq but a decline of 30.6% yoy. Unrated G3 issuance in Asia was USD 32.3bn in 3Q’15, a decline of 11.2% qoq and 6.7% yoy. Year to date, G3 issuance reached USD 346.3bn, on track to fall short of issuance volumes of 2014 (USD 487.3bn), comprised of USD 231.4bn HG issuance, USD 18.4bn HY issuance, and USD 98.4bn unrated issuance. Outstanding G3 debt, including developed market Asia, stood at USD 11.92tn at the end of third quarter 2015, a decline of 0.1% qoq, with declines in unrated debt (USD 2.3tn, 25.2% decline), but growth in HG debt (USD 9.4tn, a 8.8% growth) and HY debt (USD 211.4bn, 2.6% growth).

Total Issuance & Outstanding – Domestic CNY issuance

Total domestic CNY issuance stood at USD 143.2bn in the third quarter of 2015, similar to second quarter volume (USD 140.4bn) but still a decline of 9.5% yoy (USD 158.2bn); year to date,domestic CNY issuance reached USD 354.8bn, still on track to be significantly below 2014 volumes (USD 498.7bn). By tenor, 60.2% of third quarter issuance (USD 86.2bn) would mature in five years or less, followed by the 7 – 10 year bucket (USD 28.4bn, or 19.8% of issuance). By sector, finance led issuance totals (USD 38.7bn), followed by real estate (USD 28.2bn).

Outstanding domestic CNY debt stood at USD 6.57tn at the end of third quarter 2015, with sovereigns leading totals (USD 3.75tn), followed by financials (USD 1.35tn) and industrials (USD 554.0bn).

Key trends in offshore renminbi (CNH) and the dim sum bond markets

The pace of issuance continued to slow down on both a qoq and a yoy basis in the third quarter. For the third quarter of 2015, an equivalent of USD 3.8bn in CNH bonds were issued, a decline of 56.7% qoq and 57.6% yoy. Year to date, issuance has reached USD 20.6bn, not even half of 2014 totals (USD 42.1bn). In terms of tenor, nearly all of third quarter 2015 issuance (USD 3.7bn) was accounted for by transactions with tenors of 5-year years or less. HG deals rated AA totaling USD 1.1bn had the highest share among rated deals (28.4%). In 3Q’15, finance sector transactions totaling USD 3.1bn accounted for the largest volume of deals by sector (80.7%), followed by real estate, totaling USD 376.7mn (representing 9.8% of issuance).

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

• Vijay Chander, Executive Director, Fixed Income

SIFMA Research

• Kyle Brandon, Managing Director, Director of Research
• Sharon Sung, Assistant Vice President, Research