Bankers confidence in Asias local currency debt
markets is growing but they remain a poor substitute for
international sources of funds that remain largely closed to
the regions issuers.
International capital has only been available for high-rated or
government-linked companies in Asia since the start of 2009.
ADB attendees arriving in Bali this weekend believe local
currency bonds can fill some, but not all, of the gap.
Ray Ferguson, Standard Chartereds chief executive for
Southeast Asia, told Emerging Markets in an interview in Bali:
Most of Asias local currency markets have continued
to operate. The term green shoots is overused, but
they are starting to unfreeze a bit.
Florian Schmidt, head of debt capital markets for Asia at ING,
said that the only proven source of new funds so far is the
Philippines. Of the various domestic bond markets in the
region only the peso market has been able to pick up some of
the slack, he said. Retail investors are driving
these corporate deals, and to a bigger extent bank capital
San Miguel Brewery, a unit of a Philippines conglomerate,
showed the extent of demand for Asian currency debt at the end
of March when it sold bonds worth Ps38.8 billion ($800 millio)
in the biggest single deal in the Philippines market.
San Miguel had been planning to raise part of that total in the
international markets but demand for the peso notes came as a
Standard Chartereds Ferguson said: When we started
talking about the deal at the end of last year we were all a
bit nervous about the size, but it was a tremendous
INGs Schmidt said that many of the bonds sold by San
Miguel ended up with retail buyers, having being distributed
through the branch networks of the Philippines banks that
helped underwrite the deal. International investors, who had
flocked to appreciating Asian currencies before the 2008 crash,
Brian Baker, president for Asia at fund manager Pimco, told
Emerging Markets: We are still investing in local
currency bonds, but given the pullback in risk taking by
institutional investors we have put off launching any
Asia-specific bond fund.
Pimco launched a new Asian fund in mid-2008 targeting
inflation-protected bonds, commodities and currencies as a play
on rising inflation, but that project is now on the
shelf as a result of the crisis, Baker said.
On the other hand, the encouraging response from local
investors to bond issues indicates that Asia may be weathering
the financial turmoil better than other regions. Singapore
shopping centre operator Jurong Point Realty sold
mortgage-backed bonds at the end of April in the first such
deal for almost two years. The Philippines Metropolitan Bank
issued a Ps4.5 billion bond last week.