Asia Credit Report, Second Quarter 2018

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.

Summary

Market Overview and Highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in First Quarter 2018

Total issuance in 2Q’18 came in at USD 69.9 billion (bn) as of June 30, down 7.6% quarter-over-quarter (qoq) from 1Q’17 (USD 75.7bn) and down 12.0% year-over-year (yoy), inclusive of high grade (HG), high yield (HY), and unrated deals. Slowing Chinese credit growth, coupled with higher US interest rates and widening credit spreads across the globe at a time of increased market volatility, contributed to the slowdown in issuance. Even so, in absolute terms, issuance remains robust as issuers have generally rushed to complete deals ahead of even higher US interest rates, which are expected as the year progresses.

Domestic CNY Issuance

Total domestic CNY issuance stood at USD 152.3bn in the second quarter of 2018, up 20.3% from the first quarter (USD 126.6bn) and 6.7% yoy (USD 142.8bn). By tenor, 71.0% of second quarter issuance (USD 108.2bn) would mature in five years or less, followed by the 7-10 year bucket (USD 16.6bn, or 10.9% of issuance). By sector, finance led issuance totals (USD 43.4bn), followed by transportation (USD 22.2bn) and construction/building (USD 19.0bn). Year to date, domestic issuance totaled USD 279.0bn, an increase of 26.4% from the first half of 2017. Outstanding domestic CNY debt stood at USD 11.6tn at the end of second quarter 2018, with sovereigns leading totals (USD 6.6tn), followed by financials (USD 2.9tn) and industrials (USD 901.7bn).

Offshore Renminbi (CNH) Issuance

The pace of offshore issuance slowed down in the second quarter from the first quarter; an equivalent of USD 3.1bn in CNH bonds were issued, a decline of 20.0% qoq but increase of 30.5% yoy. In terms of tenor, transactions with tenors of 5-years or less accounted for 66.7% of second quarter issuance. HG deals rated AA totaling USD 812.3mn had the highest share among rated deals (26.5%). In terms of sector, finance was the largest issuer in 2Q’18 (USD 1.7bn), followed by real estate (USD 1.3bn) and transportation (USD 55.7mn). Year to date, offshore issuance totaled USD 6.9bn, an increase of 56.4% from the first half of 2017.

Credits

ASIFMA

  • Executive Director, Fixed Income: Vijay Chander
  • Associate: Timothee Bihet

SIFMA Research

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