On the back of positive policy signals, issuance out of China dominated the USD Asian new issue space this week with ~76% market share

New Issue Weekly Monitor

For the week beginning 9th Sep 2019
Asia ex-Japan G3

Summary

Asia G3 Year-to-date issuance: USD 239.8bn

Key Market Data (as at 12pm, 13 Sept 2019)
CT10 @ 1.793% (+21.5bps Week-on-Week)
S&P 500 @ 3009.57 (+1.13% Week-on-Week)
HSI @ 27186.35 (+1.93% Week-on-Week)
JACI Index @ 240.99 (-0.63% Week-on-Week)

For the week beginning 9 Sep 2019, USD 7.45bn of bonds was issued from 13 deals.

Breakdown: USD 5.35bn of Investment Grade, USD 1.15bn of High Yield bonds, USD 950mm of Non Rated bonds.

Commentary:
Last Friday, China’s PBOC slashed its reserve requirement ratio (RRR) by 50bps for all banks, with an additional 100bps for certain city commercial banks. This was followed shortly after with the scrapping of QFII and RQFII investment quotas for qualified investors. Both moves were optimistically received by the market, the former seen as boosting a sluggish economy while the latter a step forward in the liberalisation of capital markets.  

Elsewhere, the Trump administration announced a ‘goodwill’ delay to planned tariff hikes on Oct 1, whilst the ECB cut deposit rates and restarted QE in a final meeting chaired by outgoing president Mario Draghi. Against the global backdrop, Treasury yields rose virtually across the board for the week. 

On the back of positive policy signals, issuance out of China dominated the USD Asian new issue space this week with ~76% market share or 5.65bn printed in absolute terms. A monster multi-tranche, multi-currency (USD, CNH, HKD) deal by ICBC Hong Kong kicked off the week with ~USD3.1bn issued in total. The 2.5bn issued in USD saw modest book coverages of 1.5-2x with the lion’s share taken up by Asian banks.

Following a one-notch upgrade by S&P to BBB last week, Chinese property developer Longfor Group took advantage of a rally of some 10-15bps in its existing curve to come to market with a 850mn, 10yr issue priced at T+247bps. 

No fewer than 6 Chinese LGFVs used the uptick in market conditions to issue offshore, including Wuhan Financial with a 300mn tap of its 142mn 5.8% Dec 21 bond at 4.1% yield. Other names included Changde Urban Development, Guangxi Communications, Shuifa Group, Huai’an Traffic Holdings and Tianjin Binhai Construction and Investment (BHCI). 

Poor sentiment surrounding Tianjin-based LGFVs and SOEs following financial distress at Tewoo and Tianjin Real Estate Group led to BHCI’s postponement of a 300mn issue in July. The deal was consummated this time round at 6% yield with no tightening, or around 100bps higher than IPG in July and at a considerably higher yield than comparable Baa2 names.

Elsewhere in Asia, South Korea’s SK Hynix debuted with its first IG-rated dollar bond to an enthusiastic reception. Filling the rare niche of non-state-owned enterprise or bank, the semiconductor manufacturer printed a 5yr, 500mn issue that was 7x oversubscribed and which tightened 27.5bps from IPG. 

FWD and Bank of East Asia both issued benchmark-sized perpetuals at 6.375% and 5.875% coupon respectively. The latter’s AT1 issue is rated BB and Ba2, 5 and 4 notches respectively below its senior rating.  

For the week, 44 banks were involved either as Bookrunners or Lead Managers. By volume, HSBC continues to hold the lead with 4.95bn transacted, but Fujian-based Industrial Bank ties with HSBC for pole position in number of deals (6) and bonds (8) handled. 

Twelve new mandates were announced during the last two weeks.

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