Sustainable infrastructure was high on the agenda at this year’s Asian Development Bank annual meetings in Fiji, where climate change and ocean health have a pronounced impact on everyday life. The capital markets are also showing a growing interest in sustainable development, but Asia is still a long way from harnessing the market’s full potential.
The skies have cleared, and Asian credit is on a roll. After the end of 2018 produced one of the stormiest periods in years, the retreat of major headwinds has helped cement a solid backdrop for Asian bonds at the start of 2019. The US Federal Reserve has slammed the brakes on monetary tightening, trade tensions have subsided for now, and market stability has become a top priority for China as it wrestles with deleveraging its economy.
Delegates at the IMF’s annual meetings in Bali got an uncomfortable reminder of Asia’s vulnerability to unforeseen shocks with an earthquake in the small hours of October 11. The financial markets have been doing their part, too.
Onshore renminbi bonds are poised to become the next big thing in the global capital markets, as international investors brace for index inclusion and issuers embrace the Panda bond market as an alternative source of funding. While China has rolled out the red carpet, however, international participants appear to be holding back.
Almost five years since Chinese President Xi Jinping outlined his vision for a massive infrastructure programme to strengthen China’s trading connections, the Belt and Road initiative is beginning to make its presence felt in Asia’s financing markets.
When Green finance first hit the market, there were high hopes that issuers raising funds in such a way would benefit from improved pricing, given the increased transparency and forecast growth in demand from investors.
IFR’s latest India seminar took place in Mumbai during a timely break in the summer monsoon rains. Over two sessions, delegates debated the outlook for Indian fixed income and the potential for Green finance, tapping into two of the hottest topics in the country’s capital markets.
The Philippines, the host of this year’s Asian Development Bank annual meetings, provided an ideal backdrop for a forthright debate on the role of the capital markets in funding Asian infrastructure projects.
The end of the first quarter of 2018 provided the ideal backdrop for a debate on the future of Asia’s credit markets. After a bumper year for Asian bonds in 2017, followed by the busiest January for international issuance on record, rising US Treasury yields and renewed diplomatic tensions have injected a note of uncertainty.
The growth of the Reg S bond market has been one of the defining trends of the Asian capital markets in recent years. Driven by the seemingly unstoppable rise of Asian wealth – especially deep-pocketed Chinese investors – US dollar bond sales in the region no longer depend on the participation of US institutions.
The IMF/World Bank annual meetings this year provided an ideal backdrop for a discussion on the internationalisation of Asia’s capital markets.
The renminbi bond markets are undergoing a dramatic transformation. As China continues with the gradual internationalisation of the currency, many foreign investors and issuers are getting their first chance to participate in the onshore renminbi market.
Asia’s Green bond market is beginning to bloom. Even in a quiet year for China’s domestic market, the arrival of first-time issuers from the likes of India, Australia and Singapore is adding new depth to the region’s green finance push.
IFR Asia Asian Development Bank Roundtable 2017: Mobilising Asian investors for sustainable development
IFR’s annual ADB roundtable, held as part of the Asian Development Bank’s annual meetings hosted this year by Yokohama, took place at a significant moment. This year marked not just the 20th anniversary of the Asian financial crisis but more importantly perhaps the 50th anniversary of the founding of the Asian Development Bank.
The outlook for Asian credit has rarely been brighter. The first quarter of 2017 was a record for international bond issues from Asia, beating the previous three-month record by 25%, and high-yield offerings are booming.
The opening of China’s domestic bond market is the single biggest opportunity in the global fixed income arena today, and securitisation is likely to be among the biggest beneficiaries.
Environmental, social and governance factors are becoming ever more important in investment decisions. Whether fund managers worry about climate change or simply want to protect the long-term value of their portfolio, sustainability is now high on the agenda.
The finances of China’s local governments are once again capturing the attention of capital markets participants, but for very different reasons.
Asian loan markets are at a crossroads. 2016 has been a dismal year for the product with volumes declining to a three-year low amid market volatility, slow economic growth and limited M&A activity. The 12% year-on-year drop in the first nine months of 2016 compounds a similar decline in the same period in 2015, which was already reeling from a slowing Chinese economy.
China is going global, and so is its currency. The renminbi officially entered the International Monetary Fund’s basket of global reserve currencies on October 1, and barely a week goes by without talk of major reforms to open some aspect of the country’s capital markets to the world.
Bank capital has long been a hot topic in Asia, but the asset class has so far failed to ignite the kind of excitement that the Basel reforms once promised – at least outside of Australia. That is all about to change.
Asia’s bond markets are at the centre of a concerted marketing effort. From Pandas and Dim Sum bonds to Masalas and Formosas, many of Asia’s local debt products are already firmly established in the world’s financial lexicon.
After a dismal run for global emerging markets, Asia’s frontier sovereigns could almost be forgiven for turning down the chance to issue international bonds.
IFR’s Outlook for Indian Borrowers Roundtable took place in Singapore in December 2015. As with the Indian Credit Conference in Mumbai that had preceded it by a couple of weeks, the backdrop was IFR’s inaugural Indian Borrowers Survey, results of which are published in this supplement following the edited transcript.
The reform of China’s local government finances is creating an opportunity out of a crisis. After years of debt-fuelled expansion, the country’s provinces and municipalities are now turning to the capital markets to consolidate their borrowings and finance future spending, presenting investors with an opportunity to diversify and underwriters with a growing revenue stream.
Green bonds may be emerging as the Next Big Thing in Europe and the US, but in Asia the idea has so far been greeted with a fair dose of cynicism. Only a handful of issuers in Asia Pacific – predominantly banks – have launched bonds under the Green label, and few of the region’s homegrown investors have embraced the concept of responsible investing.
For the second year running, IFR hosted a well-attended seminar during the Asian Development Bank’s annual meeting, held this time in Kazakhstan’s gleaming new capital, Astana. Part of the ADB’s official knowledge-sharing programme, the luncheon event brought together a panel of experts to discuss the development of Asian bond markets at a time when the ADB and other public sector bodies are working hard to promote Asia’s capital markets as an alternative to traditional bank finance.
China’s growing use of international debt has been the single-most important story of the past three years in the Asian capital markets.
Bank capital securities are among the most complex in the public debt markets – and the most controversial. Since the 2008 credit crisis exposed the flaws in the products that were designed to help keep the world’s banks solvent, regulators have enforced a number of changes to mixed responses across the globe.