High grade issuers leads the charge as new issue market awakens

New Issue Weekly Monitor

For the week beginning 2nd Sep 2019
Asia ex-Japan G3


Asia G3 Year-to-date issuance: USD 232bn

Key Market Data (as at 12pm, 6 Sept 2019)
CT10 @ 1.578% (+7.9bps Week-on-Week)
S&P 500 @ 2976.0 (+1.69% Week-on-Week)
HSI @ 26672.6 (+3.68% Week-on-Week)
JACI Index @ 242.53 (+0.34% Week-on-Week)

**As of Friday morning
For the week beginning 2 Sep 2019, USD 8.69bn of bonds was issued from 20 deals.

Breakdown: USD 6.9bn of Investment Grade, USD 900mm of High Yield bonds, USD 890mm of Non Rated bonds.

PineBridge Investments LP (majority owned by Richard Li’s Pacific Century Group) has a 5yr new issue @ 6% IPG in play with CoC put at 101.**

Signs that the US-China trade war may be causing material damage to global production were further evident with August US ISM manufacturing contracting for the first time in 3 years and IHS Markit’s August manufacturing PMI the lowest in 10 years. After a short-lived rally, Treasuries backtracked strongly with a bear steepener, erasing curve inversion in the benchmark 2-10s that had many investors on tenterhooks.

Much of the reversal can be attributed to news that US-China trade talks are back on the table in October, the formal withdrawal of Hong Kong’s controversial extradition bill and reduced Brexit jitters.  As such, Monday’s US Labour Day holiday proved to be the lull before the storm as a flood of new issues hit Asian markets this past week.

The Asian ESG market got a boost from the Philippines and India with Bank of the Philippines’ Islands (BPI), Rizal Commercial (RCBC), and ReNew Power coming to market with green-themed offerings. Hot on the heels of an inaugural 100mm green bond denominated in CHF (and negative-yielding), BPI’s USD 300mm 5yr offering was priced at T+120bps and 4x oversubscribed by mostly Asian real money investors.

State-backed issuers also featured prominently in this week’s new issue roster. Power Finance Corp of India launched 300mm and 450mm 5 and 10yr tranches respectively containing CoC puts on Government of India (GOI) majority ownership cessation. The bonds, which enjoy the same rating as GOI, printed 27.5bps and 25bps tighter than IPG respectively.

Shanghai International Port Group (SIPG), 44+% owned by Shanghai SASAC, came to market with ratings of A+ for bonds in the 5 and 10yr space totalling 800mm and pricing at T+108bps and T+140bps respectively.  Clifford Capital, set up to finance project infrastructure for Singapore-based companies, priced a 5yr, 300mm bond at a tight T+35bps and trading inside its own curve. The bonds are guaranteed by the Singapore government and rated on par with the sovereign.

Taking advantage of long-term interest rates at near all-time lows, seasoned bond issuer CK Hutchison successfully issued a 750mm 3.375% coupon, 30-yr senior tranche at 3.437% yield (T+150bps). Other familiar names with benchmark size issues included ICBC Macau with a Tier 2 10nc5 bond (CT5+165bps) and BOC Aviation with a 10yr priced at T+165bps (3.096% yield).

Reflecting the market’s hunger for yield, Aluminium Corp of China (CHALCO) issued a BBB+ rated, 750mm 4.1% Perpetual NC5 to books that were more than 8x oversubscribed and 60bps tighter than IPG. However, not all bonds received warm receptions – Hyundai Capital Services’ proposed BBB+ 5yr benchmark size bond was postponed due to ‘poor market conditions’ earlier in the week.

For the week, 49 banks were involved either as Bookrunners or Lead Managers. HSBC continues to hold the lead for most active Bookrunner during the week, participating in all but 1 of the 12 deals that were priced.

Six new mandates were announced during the last two weeks.

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