2017 is a significant year in the history of Asia’s financial markets. It is now 20 years since the devaluation of the Thai baht marked the beginning of a crippling financial crisis that rippled across Asia. It’s also 20 years since Hong Kong returned to Chinese rule, following the handover of the former British colony.
Yokohama is an apt setting for the Asian Development Bank’s 50th anniversary meeting. The Japanese port city was one of the earliest to open to international trade, and one of the first beneficiaries of infrastructure financing that combined public and private resources at home and overseas.
It has taken some deep surgery, but India’s capital markets are at last on a much stronger footing. Now that regulators have done their part, it is up to investors and business leaders to take the economy to the next level.
The biggest challenge of any special report on Asia’s debt capital markets is usually finding a common thread among the region’s many individual bond markets. The latest report, however, comes with no such conundrum.
The Asian Development Bank is taking commendable steps to position itself as more than just a lender. Faced with rising regional wealth and the arrival of new multilateral institutions, it is right to have one eye on its long-term future. To remain relevant in supporting Asian development, however, it will need to forge new partnerships and show that it can offer more than just its capital.
The outlook for Asia’s capital markets has changed dramatically in the first six weeks of 2016 – and not for the better. Most outlooks conceived before the end of last year had been torn up by the middle of January, written off as overly optimistic projections after a rout in commodity prices and global equity markets savaged global confidence.
Eighteen months into Narendra Modi’s government, things are looking up for India. Growth is quickening, inflation is under control, and reforms are coming through. Harnessing that momentum, however, remains a constant challenge, and India’s prime minister will need to work hard if he is to come close to meeting his grand ambitions.
Asia’s debt capital markets are facing an uncertain future. Interest rate hikes are on the cards in the US, China’s stock market is in turmoil and the eurozone may be falling apart.
Hype is returning to the renminbi capital markets. After a few lacklustre years for Chinese equities, Shanghai and Hong Kong are on their biggest bull runs in years, while interest rate cuts have lifted interest in renminbi bonds.
This year’s Asian Development Bank annual meeting takes place on the European side of the Caspian Sea in Baku, Azerbaijan. While that may seem an odd choice for the Manila-based institution, it does provide an excellent backdrop for many of the talking points troubling the more Eastern parts of Asia.
The pace of deals has slowed in recent months, but South-East Asia continues to provide a tantalising opportunity for capital markets professionals.
Asian credit has been enjoying its time in the sun in recent years. Companies across the region have been able to fund their growth plans at low rates, and investors have done well.
India’s capital markets are approaching a pivotal moment. After Narendra Modi’s landslide election victory earlier this year, initial enthusiasm has begun to give way to lingering doubts that the new regime can deliver on its reform agenda.
As Asia’s capital markets hurtle towards the end of another busy year, signs of the region’s maturity are becoming clearer. Deal volumes are up, as rising equity valuations and low borrowing costs lure more issuers into the financing markets. More importantly, the range of products is also growing as Asia’s markets become deeper and more sophisticated.
A little volatility can be a good thing. For years, since China began opening its currency to overseas buyers, investors have had a free ride. The renminbi has steadily gained about 25% against the US dollar, making the overseas Dim Sum market one of the world’s biggest one-way bets.
Asia’s debt capital markets are enjoying another record year. Excluding Japan and Australasia, total G3 bond issuance up to mid-June had passed the US$100bn mark, according to Thomson Reuters data, putting Asia on track for a full-year total of US$200bn.
South-East Asia’s capital markets were sent reeling in the middle of 2013, when the first hints at an end to the easy-money policies of the US savaged the world’s emerging markets. That even the weakest economies managed to stave off a full-blown crisis, however, is an important source of comfort.
This year’s Asian Issuers Special Report showcases a group of issuers that each demonstrated an ability to adapt to changing market conditions.
This year’s India report comes at an especially challenging time for the world’s second most populous nation.
After the first half of 2013 broke all manner of records for the volume of debt offerings from Asia – not to mention revenues for underwriters – the inevitable correction in Asian credit was always going to be painful.
Just when investors thought it was safe to go back in the water, Asia’s equity markets have sent them running for the shore once more. The dramatic reversal in risk appetite that followed a US pledge to unwind an unprecedented monetary stimulus has knocked equity indices down by 10%–20% across Asia, putting paid to a host of IPOs across the region.
A sense of enthusiasm is returning to the offshore renminbi markets. Singapore has just introduced renminbi clearing, already resulting in the first foreign-exchange trades to be cleared locally, and DBS and HSBC are now vying to be the first to offer locally settled renminbi bonds to the city state’s investors.
The Asian Development Bank’s return to India brings with it a marked contrast from last year’s annual meeting in Manila. While the Philippines, under a new president with big plans for economic reforms and infrastructure investment, was – and still is – drawing praise from analysts and attracting crowds of enthusiastic investors, the mood in New Delhi is far more circumspect.
South-East Asia’s economies are in full voice once again. GDP numbers are strong and stable, rating agencies are handing out upgrades and international investors are pouring in. It’s no surprise that the region is taking a bigger share of Asian capital market activity.
Breaking records may have almost become passé for Asian bond markets, but the fact that there are expectations that Asian issuance this year may even surpass the blockbuster levels of 2012 means it is going to be an eventful year.