Emerging corporate bond funds searching for debt to buy up in the absence of Russian and Brazilian borrowers have found themselves jostling with a growing number of cash-rich Asian investors for new issues from the region.
Bonds from Asian companies, largely Chinese, are dominating the new dollar issue market now that once-prolific Russian and Latin American borrowers have been shut out by Western sanctions on Moscow, a corruption scandal at Brazil’s biggest company Petrobras, weaker commodity prices and fears of a default in Venezuela.
Asian companies have stepped in to fill the void, accounting for almost 60 per cent of this year’s emerging corporate bond sales, having raised US$70 billion as of the end of April, according to BNP Paribas. That’s up from a 51 per cent share last year and a meagre 17 per cent in 2008, BNP says.
So far so good. But Asia’s swelling pension and mutual fund industries have also created a huge new demand base at home, elbowing out the Western funds.
Greg Saichin, head of emerging debt at Allianz Global Investors, estimated that 60 to 70 per cent of the average new issue in Asia is snapped up by locals.
"Some years ago the syndicates would come to Europe and the United States peddling these bonds and no broker would ever close the book before people in these latitudes had a look," he said.