Asian bond issuance dries-up in holiday lull

Asian bond issuance dries-up in holiday lull

SINGAPORE (Dow Jones): New offerings of Asian international debt remained at a standstill this week with many issuers preferring to wait until after the usual holiday season lull to enter the market.

Among the issuers that could tap the U.S. dollar bond market later in January are Indonesia, the Philippines and China, analysts say.

Meanwhile, Asia could see an increase in issuance of local currency bonds in the new year as Asian issuers look to decrease their reliance on dollar-denominated debt and take advantage of a benign interest-rate environment in Asia, Standard Chartered Bank fixed income strategist Rosemary Fu said in research report.

"Factors supporting this outlook include the harsh lessons learned by Asian corporates about the dangers of over-leveraging on short-term U.S. dollar debt, the ongoing disintermediation process in the region, and the increasingly discerning international investors," according to Fu.

The disintermediation trend was spawned by a post financial crisis credit crunch that forced issuers to replace short-term bank loans with longer-term capital market debt issuance.

Monetary authorities in the regional also have done their part from a regulatory standpoint to help lay the groundwork for continued growth in local bond markets, noted Brian Verlaan, head of fixed income strategy at Standard Chartered.

One of the important steps governments have taken is to offer longer-dated securities to help establish a full yield curve, Verlaan added.

The Philippines recently added a 25-year bond to its mix of government securities, while the Monetary Authority of Singapore announced it will expand its offering schedule to include a 15- year bond later in the year.

Additionally, poor performing stock markets in most Asian countries have prompted investors to increase the bond holdings in their portfolios.

"Demand for local currency bonds will grow significantly in 2001, led by decentralization and the quest for duration," Verlaan said.

"In 2001, we are confident that the central banks will remain cognizant of the need to nurture corporate bond markets through a well-defined government yield curve, and we look forward to broader and deeper markets in the year ahead," he added.