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.
Asian energy credits have suffered less than those in other emerging markets, but some are still finding it tough to cope with a continuing slump in oil and commodities prices.
Just as Chinese internet finance companies are gearing up for a capital-raising binge, a vast fraud in the poorly regulated sector has cast a shadow on rosy valuations.
After breakthroughs in Singapore and South Korea, the rest of Asia is well behind with the introduction of covered bonds. The pace of progress, however, is likely to remain slow.
A repeat of Apple’s 2015 blockbuster may be unlikely, but the Australian credit market can accommodate many more international issuers at more modest sizes.
Investors are starting to pay greater attention to individual credit quality among Chinese SOEs as the pressure for reform dispels earlier expectations of unconditional state support.
India’s ECM momentum looks set to resume after a slow start to the year thanks to a combination of robust economic growth, structural reforms and government sell-downs.
China is gearing up to introduce a registration-based IPO system, but doubts remain over the regulators’ ability to relinquish control. At least initially, the market-oriented regime will be heavily supervised.
The offshore renminbi liquidity crunch hit the Dim Sum market hard at the start of the year, but an attractive carry-trade opportunity should rekindle the interest of onshore buyers once capital controls are eased.