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Treasury & Capital Markets
Asia G3 bond issuance dips in first nine months of 2022
High-yield sector records only one deal in third quarter as Chinese property names remain largely absent from market
Chito Santiago 3 Oct 2022

Issuance of G3 bonds in Asia, outside of Japan and Australia, dropped by 43.9% in the first nine months of 2022 to US$186.95 billion, compared with US$333.03 billion in the corresponding period of 2021. This was the lowest nine-month volume since January-September 2016 when the issuance amounted to US$176.13 billion as the market continued to be buffeted by volatility on the back of rising interest rates and higher inflation.

Figures provided by Refinitiv, an LSEG business, show the number of deals declined from 652 to 419 during the period as several issuers remained at the sidelines and instead accessed the local currency (LCY) bond markets for funding.

This was evident in the second quarter of the year when the issuance of LCY bonds in emerging East Asian economies – comprising China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam – amounted to US$2.4 trillion. According to the latest issue of Asia Bond Monitor published by the Asian Development Bank (ADB) on September 14, the sizable issuance was largely driven by increased financing needs from China, especially for infrastructure projects to revitalize the economy.

The decline in G3 bond issuance was noticeable during the third quarter of 2022 when the volume plummeted 54% to US$43.09 billion from over US$93.67 billion in the same period a year ago with the number of deals plunging from 201 to 113.

Significant declines

Amid the huge decline in volume, China remained the largest issuer in the first nine months of 2022 with US$68.54 billion, down 49.3% from US$135.23 billion in January-September 2021.

Other markets also suffered significant decreases in issuance volume such as South Korea with US$39.73 billion (down 11.2%), Hong Kong US$15.93 billion (down 66.6%), Singapore US$10.75 billion (down 34.8%), Indonesia US$8.23 billion (down 53.6%), India US$6.79 billion (down 62.2%), the Philippines US$2.86 billion (down 66.5%), and Malaysia US$2.06 billion (down 76.1%). The issuances from the Philippines did not include those from supranationals such as ADB.

Only Taiwan bucked the downtrend during the first nine months of 2022 when the issuance rose 46.3% to US$5.27 billion from US$3.60 billion a year ago.

The decline in G3 bond issuance in Asia, outside of Japan and Australasia, was more pronounced in the high-yield sector when the volume dipped to US$8.43 billion in the first nine months of 2022, against US$57.82 billion a year earlier.

China saw its volume at only US$2.96 billion from just nine deals, compared with US$30.51 billion from 89 offerings in January-September 2021, as Chinese property developers, which usually account for the bulk of the issuance from the sector, were largely absent from the market.

Indian issuers also raised a smaller amount from the high-yield bond market at US$2.02 billion, compared with US$9.44 billion in the first nine months of 2021, while issuance from Hong Kong slipped to only US$1.79 billion from US$10.18 billion during the same period.

Sole high-yield issuer

To illustrate the dearth of high-yield bond issuance, there was only one deal arranged out of Asia, outside of Japan and Australasia, in the third quarter of 2022, which amounted to US$300 million, according to Refinitiv, compared with issuances worth US$16.81 billion in the corresponding period a year earlier.

Mianyang Investment Holding (Group) Company of China, which is directly and wholly owned by Mianyang city government, was the only high-yield bond issuer during the period, pricing a three-year offering on August 1 with a coupon of 6.70%.

Meanwhile, issuances of ESG-related bonds (green, social, sustainability and sustainability-linked) remained active in the first nine months of 2022, totalling US$42.73 billion from 92 deals. This volume, though, was 26.4% lower than the US$58.06 billion issued in the comparable period of last year.

China and South Korea were the largest ESG bond issuers during January-September 2022 with volumes of US$20.41 billion and US$13.14 billion, respectively, compared with previous year’s levels of US$24.02 billion and US$13.70 billion.

For the third quarter of 2022, the total ESG-related bonds issued amounted to US$8.07 billion, or just half of the US$16.37 billion volume in the same quarter of 2021, with the largest issuances coming from the Asian Infrastructure Investment Bank, Lenovo Group, Korea Electric Power Corporation and Korea Housing Finance Corporation.

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