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HSBC

The Hongkong and Shanghai Banking Corporation was founded in Hong Kong on March 3, 1865, and in Shanghai one month later. In 1980, HSBC acquired 51 per cent of Marine Midland Bank, buying the rest in 1987. HSBC Holdings was established in Britain in 1991 as the parent of The Hongkong and Shanghai Banking Corporation ahead of its purchase of the UK-based Midland Bank and the impending 1997 transfer of sovereignty of Hong Kong from Britain to China. 

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DEBT

HSBC turns Asian loan clients into junk bond issuers

PUBLISHED : Thursday, 04 April, 2013, 12:00am
UPDATED : Thursday, 04 April, 2013, 3:35am

HSBC is leading the drive to convert companies to bonds from loans in Asia, helping it enter the global top 10 for junk issuance.

Europe's largest bank managed US$5.3 billion of high-yield debt globally in the first quarter, moving up to 10th place after ranking 13th in the previous three full years, data shows. HSBC led junk bond underwriting in Asia, excluding Japan, last year and says 12 of its 19 deals came from commercial bank clients, or 58 per cent of the US$2.3 billion it managed in US dollars, euro and yen. Last week, it handled offerings by Citic Pacific and Sunac China.

"The next wave of issuers is not conglomerates, but fast-growing medium-size companies," said Gordon French, HSBC's head of global markets for Asia Pacific. "Bonds are a complementary and viable source of funding for them, alongside traditional bank debt."

HSBC is jostling with UBS for the top spot in emerging Asia's high-yield market this year, each with a 12 per cent market share, while Citigroup follows in third with 10 per cent and Deutsche Bank in fourth with 9 per cent. As companies shifted from loans in the region, junk bonds almost tripled to US$14.5 billion, rising to 10 per cent of the global total from 3 per cent. That exceeded the US$13.4 billion in regional syndicated loans of all ratings, up 60 per cent from a year earlier.

Demand is being driven by investors seeking higher yields than in the US, Europe and Japan, as well as a boom in private banking for Asia's own millionaires.

While junk bond yields in the region have fallen to 7.08 per cent from 9.35 per cent a year ago, that is still higher than the 6.39 per cent average for similarly rated debt globally, according to the Bank of America Merrill Lynch indices.

Investors "have been faced with zero per cent cash and at the same time maybe aren't comfortable enough with the world outlook to go to equities," said Ashley Perrott, of UBS Global Asset Management. "High-yield bonds have been that happy middle-ground where yields are still reasonably good, credit fundamentals are pretty OK, and economic fundamentals are still robust within Asia."

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