Euro 'new base' for Asian bond issuers<\/p>\n
HONG KONG (Reuters): The advent of the euro will open a new
\nsource of funding for Asian borrowers, but analysts said it could
\ntake some time before the region's bond issuers start tapping the
\nmarket.<\/p>\n
"In time, the euro-denominated debt market could become almost
\nas important as the U.S. dollar market, given the sheer size of
\npension funds...and that will open up a whole new debt market for
\nAsia," said Raja V, head of fixed income research at BA Asia.<\/p>\n
"But I don't think anyone (in Asia) wants to do a euro debt
\nissue just yet," he said.<\/p>\n
Chris Francis, head of credit research at Merrill Lynch (Asia
\nPacific), said the creation of the euro was a great opportunity
\nfor Asian borrowers in the medium term.<\/p>\n
"But in the short term, general sentiment toward emerging
\nmarket debt by European investors is still weak (in light of the)
\nRussian collapse just six months ago," he said, referring to
\nRussia's debt and economic crisis.<\/p>\n
The euro was officially created last Friday to merge the
\ncurrencies of Austria, Belgium, Finland, France, Germany,
\nIreland, Italy, Luxembourg, the Netherlands, Portugal and Spain.<\/p>\n
It made its trading debut in Asia on Monday, opening at
\nUS$1.1747 at 05:00 a.m (1800 GMT) in Sydney and rising as high as
\n$1.1913 in early European trading.<\/p>\n
The birth of the euro would open to Asian borrowers a new
\nclass of European bond buyers that would augment an already well-
\nestablished investor base for U.S.-dollar denominated deals of
\nAsian issuers.<\/p>\n
"Most of the investors in Europe traditionally were currency
\nand government bond investors who were deciding whether, say, the
\n10-year deutschmark curve was attractive relative to the five-
\nyear lira curve," said Francis.<\/p>\n
"Now, most of that has disappeared with the euro and fixed
\nincome investors are reinventing themselves as credit investors,"
\nhe said.<\/p>\n
Up to now, European-currency denominated bond issues of Asian
\nborrowers typically have performed poorly in the secondary
\nmarket, said Paul Marshall, credit research analyst at Barclays
\nCapital.<\/p>\n
"European currency investors haven't been as Asia- or credit-
\nliterate as U.S. dollar investors, so when there have been Asian
\nbonds in individual European currencies, these have lagged in
\nsecondary trading," he said.<\/p>\n
"The euro might force investors to be more credit-literate and
\nthat should ultimately get them looking at the better yields
\navailable from Asian issuers."<\/p>\n
The Philippine government has been mulling a euro-denominated
\nissue as part of its overseas borrowing plan, while China's
\nministry of finance said last October it might consider a euro
\nissue.<\/p>\n
Analysts said that among Asian issuers, sovereign and quasi-
\nsovereign borrowers certainly would be the first to tap the euro
\nbond market, but even these top-tier names were likely to take a
\nwait-and-see approach.<\/p>\n
"It will take six months just for people to get used to
\nquoting in the new currency," said BA Asia's Raja V.<\/p>\n
Of the emerging market issuers, "the ones that will benefit
\nright away will probably be from Eastern Europe, with Latin
\nAmerica coming second and then Asia," he said.<\/p>",
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