Asia Credit Roars into New Year as wall of Debt Looms

SINGAPORE/HONG KONG, Jan 13 (Reuters) – A busy start to the year for Asia’s debt markets reflects global cash pouring into the region and companies in a hurry to lock in funding before a record pile of dues must be repaid.

There was $22.8 billion raised in credit in the first week of January, a record for first full trading week of the year in Asia.

The amount was slightly more than the $22.5 billion raised last year, Refinitiv data shows.

A record $283.3 billion in existing debt is due to mature over 2021.

U.S. markets have also been busy, however Asia’s bankers say the rush of 37 deals this year has had phones running hot as issuers want to raise money ahead of time and as investors with extra allocation to the region’s debt have cash to put to work.

“I have not seen a robust start like this in 10 years,” said Vishal Goenka, Asia-Pacific head of credit sales for institutional clients at Deutsche Bank in Singapore, which was involved in 14 high-yield deals last week.

“It sets the starting gun and the thought process,” he said, as investors from global asset managers to regional private banks turn buyers. “Because of more liquidity, more issuances can be cleared. We’re getting orders from a wide range.”

Asia’s corporate credits, which are paying better than comparably risky debt in Europe and the United States, were a popular trade recommendation for 2021 from big investment houses, including Fidelity and Blackrock’s research arm.

COVID-19 vaccine rollouts have also underpinned investment flows into emerging markets and helped Indonesia secure record-low coupons last week for $4.2 billion in long-dated dollar and euro bonds.

Bankers expect that both supply and demand can hold up. Another $6.3 billion has already been raised so far this week according to Dealogic, although that is well short of the $24.5 billion in debt sold in Asia during the second week of 2020.

“2021 will see an enhanced level of corporate and private-equity driven M&A, giving rise to debt-financed acquisitions, fuelling more demand for loans and bonds,” said Rahul Patkar, head of Debt Capital Markets for Asia ex-Japan at Goldman Sachs.

“We expect an increased risk appetite from both corporates, who are both cash rich and have access to capital markets, and private equity buyers, who have large amounts of dry powder.”

Another factor driving solid turnover is refinancing needs.

While it is too early in the year to place too much significance on one busy week, a wall of debt falling due and a sense among corporate treasurers that they best strike while the iron is hot underpins confidence in a robust pipeline.

“It’s a situation where most companies look to do their re-financings at least three-to-six months in advance because it’s already one of their current liabilities,” said Amy Tan, head of debt capital markets’ origination, Asia ex Japan, at JP Morgan.

Rising coronavirus cases, the fragility of the economic rebound and simmering Sino-U.S. tension – following investment bans covering dozens of Chinese companies – have also made some market participants keen to make hay while the sun shines.

“You’ve seen a quick start to the year as the sense of urgency that wasn’t there last year is starting to creep in,” said Clifford Lee, head of fixed income at DBS, which has a hand in more than a dozen 2021 deals.

“I’ll be pleasantly surprised if the new issuance window remains open through the year, considering the stress and rhetoric we’re hearing.”

(Reporting by Tom Westbrook and Scott Murdoch; Editing by Kim Coghill)

Source: Reuters

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