Deutsche co-chief for Asia an unabashed bull
Bhupinder Singh, Deutsche Bank's Asia-Pacific co-head of investment banking, is - as you might expect - positive on the outlook for Asia-Pacific investment banking.
Bhupinder Singh, Deutsche Bank's Asia-Pacific co-head of investment banking, is - as you might expect - positive on the outlook for Asia-Pacific investment banking.
He believes that a strong economic recovery now underway in the United States, combined with better growth in the euro zone, will propel China's economy and its capital markets.
"The world economy will continue to recover and recover strongly. China should be in a good position to leverage on this recovery in export demand," he said.
Should China's economic growth rebound, investors will pile back into its stocks, which are cheap by virtually any historical measure, he says.
This is reflected in the bank's pipeline of Chinese equity deals coming due, not the least of which is the imminent listing of Alibaba. Deutsche will be a bookrunner on the offer which, at about US$20 billion, will be one of the world's biggest floats.
"The pipeline I've seen in the past six months is potentially greater than anything I've seen in the recent past," said Singh.
China should be in a good position to leverage on this recovery
His views for China's debt markets are similarly upbeat. Singh projects that Asian investment-grade issuance will finish the year at a record volume. China generated a lot of this issuance and this would continue, said Singh, if only because issuance was still far below potential. He noted that Chinese lenders were still overwhelmingly reliant on bank loans, and were only starting to make the transition to capital markets.
The high-yield outlook is a different kettle of fish. Chinese banks cannot lend to property firms for the purpose of buying land. This has oriented them towards offshore bond markets, and these issuers in a given month typically make up half of Asia's high-yield volumes.
However, persistent news reports about an oversupplied real estate market, amplified by wider concerns about the health of the economy and its banking system, has hurt issuance. China's property bond issuance was off its usual pace in the second quarter.
Once again, however, Singh sees cause for optimism. This is based on the view that an upward trending global economy is reorienting investors towards more aggressive risk-taking, and this includes putting more bets on the carry trade - or borrowing at low interest rates to reinvest in a higher yielding instrument, often in a different currency.
This is streaming investors into China's high-yield bonds, of which most are issued by property firms.
"The carry game is still on the table. The China high-yield market offers among the best risk-adjusted returns in the world."
Singh's optimism covers the whole region. He holds a long-term bullish view on the Indian market, which is based on the formation of the first majority government in the country in three decades. He believes that will create stability and a firmer hand on policy decisions, which should be positive for India's economy and markets.
He also sees a strong upwards trend in mergers and acquisitions driven by cash-rich, family-owned businesses that have outgrown their home market. This is prodding the owners of such businesses to expand offshore.
An example of this is Thai billionaire Charoen Sirivadhanabhakdi's 2013 acquisition of Singaporean conglomerate Fraser and Neave.
