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Treasury & Capital Markets
Asia G3 bond market rebounds in Q1 2024
Higher bond deal flow bucks decline in loan syndication and equity fund raising
Chito Santiago 5 Apr 2024

Asia’s G3 bond market issuance recovered in the first quarter of 2024, compared with a year ago, providing a bright spot in capital markets’ fund raising in the region.

Figures supplied by LSEG showed the issuance volume in Asia, outside of Japan and Australasia, amounted to over US$62.54 billion in January-March this year, up 5.1% from US$59.49 billion in the comparable period in 2023. The increase bucked the downtrend noted in other funding avenues such as equities and loan syndication.

South Korea remained the biggest G3 bond issuer during the period with a total volume of US$22.38 billion, up from US$17.72 billion in the first quarter of 2023. This was driven by billion-dollar deals from SK hynix (US$1.5 billion), Korea National Oil Corporation (US$1.4 billion), Korea Electric Power Corporation (US$1.2 billion), and Hyundai Capital Services (US$1 billion).

China also registered an increase, to US$14.86 billion from US$13.73 billion, on the back of continued issuances from financial institutions, including China International Capital Corporation (US$1.2 billion), Agricultural Bank of China (US$600 million), and Shanghai Pudong Development Bank (US$300 million).

India’s G3 bond market was also up with an issuance volume of US$4.21 billion, against US$1.75 billion in the corresponding period a year ago. The increment was anchored by deals executed by the likes of Shriram Finance (US$750 million), State Bank of India (US$600 million), IRB Infrastructure Developers (US$540 million), Adani Green Energy (US$409 million), and Indiabulls Housing Finance (US$300 million).

Hong Kong issuances

Issuance out of Hong Kong showed a huge drop, from US$9.57 billion to US$3.11 billion. Airport Authority Hong Kong, which during the past two years usually accessed the US dollar bond market early in the year with sizeable offerings, tapped instead the Hong Kong dollar bond market this time, pricing on January 1 a HK$4 billion (US$510.86 million) deal. The Hong Kong Special Administrative Region (HKSAR) government tapped the G3 bond market in February with small issuances of US$200 million and €80 million (US$86.96 million) as part of its second digital bond issuance totalling about HK$6 billion equivalent that also included Hong Kong dollar and renminbi tranches. Another notable deal out of Hong Kong was the US$500 million non-preferred loss-absorbing notes by Bank of East Asia printed in March.

Meanwhile, the US dollar high-yield bond market manifested some activity in the first quarter of 2024 with a total volume of US$2.65 billion from six deals, according to LSEG. India accounted for the lion’s share of the total with US$2.05 billion, on the back of issuances from the likes of Shriram Finance, IRB Infrastructure Developers, and Indiabulls Housing Finance.

Amid the increase in G3 bond issuance, the volume of ESG-related (green, social, blue, sustainability, sustainability-linked) deals was steady at US$15.70 billion, with issuers out of China and South Korea crowding the market. India, though, figured prominently in the social aspect of the market with offerings of social bonds from Shriram Finance, Indiabulls Housing, and India Vehicle Finance.

Syndicated loans plunge

In contrast to the rebound in the G3 bond market, the volume of syndicated loans in Asia, outside of Japan and Australasia, plummeted by 51% to US$72.55 billion in the first three months of 2024, from US$147.97 billion in the same period in the previous year. Loan deals out of China plunged to US$24.66 billion from US$81.26 billion in the first quarter of 2023, while those out of Hong Kong fell to US$17.49 billion from US$22.69 billion.

Other jurisdictions that recorded significant declines in loan volumes included Singapore to US$5.96 billion (down 59.4%), India US$4.03 billion (down 45.6%), South Korea US$1.19 billion (down 55.8%), Thailand US$517.6 million (down 59.1%), Vietnam US$327 million (down 88.1%), and Indonesia US$300 million (down 91.5%).

Taiwan, though, showed a strong appetite in the loan market with companies raising a total of US$16.40 billion in January-March 2024, up from US$8.86 billion a year earlier. A large chunk of the borrowings were ESG-related loans amounting to US$7.46 billion during the period, or more than double the US$3.26 billion that they raised the year before.

ECM deal flows subdued

In other fund raising in the first quarter of 2024, the value of transactions in the equity capital markets (ECM) slumped to US$31.74 billion from US$58.86 billion in the same period a year ago. India topped the league table with US$14.60 billion worth of deals, or more than twice the US$5.57 billion it raised a year earlier.

South Korea also manifested an active ECM market this year with transactions valued at US$5.30 billion, compared with US$1.98 billion in the first quarter of 2023. It was China’s smaller transaction volume that brought the ECM tally down as it suffered a huge drop to US$6.97 billion from US$43.55 billion as issuers stayed at the sidelines during the period.

ECM deal flows out of Hong Kong were also subdued, totalling US$223.26 million in January-March 2024, compared with US$3.30 billion a year earlier.

There were fewer initial public offerings (IPOs) with the proceeds tumbling to US$6.85 billion, according to LSEG, from US$16.51 billion a year ago. The IPOs were also small in terms of amount, with the biggest deal amounting to US$340.36 million equivalent for Grandtop Yongxing Group Company of China, followed by Bharat Highways InvIT of India, which raised US$301.78 million, and Sustainable Energy Infra Trust, also of India, which priced a US$272.48 million IPO.

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