Asia greenback bond volumes seen rising 20% as China offers collect tempo

By Scott Murdoch

SYDNEY (Reuters) – Asian greenback bond issuance is predicted to rise round 20% in 2025 over final yr, pushed by Chinese language debt offers and as U.S. rate of interest cuts make it extra inexpensive for firms to problem greenback bonds slightly than native foreign money debt.

Within the first few days of 2025, no less than $6 billion value of greenback bonds had been issued, LSEG information and time period sheets reviewed by Reuters confirmed. Offers have been priced by the Export Import Financial institution of Korea and aluminium producer China Hongqiao Group.

“We predict a couple of 20% enhance in greenback bonds out of Asia, not considering Japan or Australia, to succeed in about $220-$225 billion in 2025,” Rishi Jalan, Citigroup (NYSE:C)’s Asia Pacific debt syndicate head, stated. Round $175 billion value of greenback bonds had been issued in 2024.

“To achieve that degree, numerous weapons should fireplace to satisfy that quantity,” he stated.

“So, we might want to see among the massive China tech names come again in dimension, a pick-up in issuance in India, there was numerous quantity misplaced in India to native currencies and that might want to come again into {dollars}.”

Elevated greenback issuance helps fund Asia-based firms’ growth ambitions and nudges charges larger for main funding banks working as bookrunners on the offers.

Increased U.S. rates of interest for a lot of the previous two years had made it cheaper for a lot of firms in Asia to problem bonds in their very own currencies or depend on home financial institution funding slightly than problem greenback bonds.

However the Fed diminished the coverage price by a full proportion level over its final three conferences of 2024, and is predicted to maintain the speed within the present vary of 4.25% to 4.5% on the subsequent assembly on Jan. 28-29.

China’s expertise behemoths are predicted to steer the surge in greenback debt issuance this yr, Jalan stated. As a precursor, e-commerce companies Alibaba (NYSE:BABA) and Meituan raised a mixed $7.5 billion through greenback bonds late final yr.

The 2 tech giants raised cash final yr partially to pay down debt and entry capital to fund future development. Bankers anticipate that pattern to proceed in 2025.

DRIVING FORCE

China, an engine of development for the greenback debt market in Asia, issued $77.1 billion value of greenback bonds in 2024, in line with Dealogic information, an 81% enhance on the $42.5 billion raised one yr earlier.

Regardless of the sharp rise, nevertheless, the quantity remained nicely off the 2019 peak when $210.5 billion was raised, the information confirmed.

“Excessive grade Chinese language firms are in a position to problem now and people firms are extra snug with the place the charges are in comparison with 2023 and first half of 2024,” stated Avinash Thakur, head of capital markets financing, Asia Pacific, at Barclays (LON:BARC).

“There might be issuance in tech, they’ve funding necessities and within the industrials sector,” he stated.

Bankers stated it was unlikely the nation’s troubled property sector, a significant issuer of junk bonds earlier than a debt disaster hit the sector in 2021, will return to the markets anytime quickly because it stays in turmoil.

“The sector remains to be below stress, property costs proceed to be down and debt ranges are excessive,” Thakur stated.

Elsewhere within the area, South Korean greenback bond issuance rose 14.5% in 2024 to almost $50 billion however the present political instability might immediate buyers to keep away from offers in that market, stated Jini Lee, a companion at regulation agency Ashurst.

“Traders trying to diversify away from U.S. investments and had wished to spend money on Asia might have seemed in direction of India and Korea,” Lee stated, including that attributable to pessimism in direction of China, different Asian markets have gained reputation with buyers from exterior the area.

“Some buyers might select to attend for the political scenario to stabilise earlier than investing in South Korean firms so the market could also be barely muted previous to that.”