Asians 'key' samurai market borrowers

Asians 'key' samurai market borrowers

TOKYO (Reuter): Asian fund-raisers could become the key borrowers in the samurai market after the recent boom in dual- currency samurai issuing ended abruptly due to the dollar's fall against the yen, underwriting sources said yesterday.

With the issuance of dual samurais grinding to a halt in June, the samurai market was dominated by issuers from Hong Kong, Taiwan, South Korea and Indonesia during the month, with a South African bond also being issued.

"There are geographical benefits for Asian borrowers to issue in Japan. Japan is also very familiar to them," said Masaru Hamazaki, deputy manager at Yamaichi Research Institute.

"Without dual-currency bonds, the samurai market will likely be dominated by Asian borrowers," he said.

Record-low interest rates in Japan will also attract stronger interest by issuers.

The capacity in the samurai market is likely to shrink to where it was two years ago without the issuance of dual-currency samurais, while the market will lure fund raisers with borrowers carrying lower credit ratings, they said.

"The countries or firms with lower credit ratings like to raise funds in the samurai market as they can raise at a lower cost than in the euro market. That is the reason the Asians will be the key borrower in the samurai market," Hamazaki said.

Samurai bond issuing volume plunged to its lowest level in June since May 1995 and there was no issuance of dual-currency samurais during the month, the first time that has happened since August 1995.

Underwriters said overall samurai issues are expected to average about 100 billion yen per month, with eastern European and other emerging market likely to be the key fund-raisers along with the Asian borrowers.

Underwriters said that China, especially the banking affiliates of the central bank of China, and fund raisers from South Korea, could issue regularly in the future.

As long as the dollar does not make a dynamic recovery, the Asians are expected to lead the samurai market, they said.

"Underwriters are still looking for chances to offer the dual- currency bonds in the samurai market again," a senior underwriter said.

Dual-currency samurai bond volume soared in 1996, amounting to 2.4 trillion yen compared with the previous record of 600 billion yen in 1995.

During the past two years, many corporations made successful debuts in the samurai markets by issuing large volume of dual- currency samurai bonds for retail investors, with many of them issued by new faces from western firms.