More Asian companies turning to bond market

More Asian companies turning to bond market
By Thomas Cho | Posted: 20 November 2012 2116 hrs
     
SINGAPORE: More Asian companies are turning to the bond market for a cheaper source of long-term financing.

This following rising liquidity in the region as major central banks in the United States, Europe and Japan undertake quantitative easing measures.

Bonds issued in Asia, excluding Australia and Japan, have increased some 55 percent from US$461 billion in the first 10 months of 2011 to US$706 billion till end of October this year.

Looking ahead, rising investor demand for safe assets will boost the Asian bond market further.

Debt financing through corporate bonds has been mostly popular among companies in South Korea and Japan.

Analysts said the trend has now caught on with Southeast Asian firms.

Bond issuance in local currency has grown 26 per cent in Indonesia and over 18 percent in the Philippines and Singapore in the second quarter of 2012 year-on-year.

And among the big players are companies in the energy, transportation, and real estate sectors.

Big issues include Genting Singapore's S$1.8 billion perpetual bonds at 5.125 percent, as well as several notes by OCBC and DBS.

Adam McCabe, Senior Portfolio Manager, Asian Fixed Income, Aberdeen Asset Management Asia, said: "From an investor's perspective, Southeast Asia has a very mature market relative to some of the more immature and developing markets. If you look at Singapore particularly, the sovereign rating is triple A. That is one of the very few triple A rated sovereign in the world."

With growing economic uncertainty, analysts said more investors are turning to safe assets like bonds.

Rising inflation is also a concern as investments in risky assets may yield negative real returns after adjusting for inflation.

Lenny Feder, Group Head of Wholesale Banking Management Group at Standard Chartered Bank, said: "People are risk-adversity these days. So, they have a lot of money sitting in cash. Cash in the bank account isn't earning very much at all. So, on a relative basis, a bond may be a more attractive investment. But, in addition, if you are going to invest in bonds globally, then will you rather be investing in Asia where there is a lot of growth potential versus the West, where there is less?"

Islamic bonds are now becoming popular as well in the region.

These bonds that do not pay coupon interest are likely to be in hot demand by cash-rich Middle Eastern investors.

Such bonds issued in Asia, excluding Australia and Japan, jumped 17 percent to US$17 billion in the first 10 months of 2012.

Sean Chang, Head of Asian Debt Investment at Baring Asset Management (Asia), said: "The yield differentiate in this region is still attractive and not mentioning currency wise, the outlook is also very positive. With the much better fundamentals in this part of the region, we saw Indonesia got upgraded earlier this year."

Singapore-listed Golden Agri-Resources has recently raised US$490 million from selling five-year Islamic medium-term notes, called sukuk.

- CNA/de


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