Asia G3 bond issuance hits record high
Investment grade credits dominate deal flow in first quarter of 2021
5 Apr 2021 | Chito Santiago

The G3 bond issuance in Asia, outside of Japan and Australasia, hit a record high US$112.08 billion in the first quarter of 2021 as the market maintained the strong momentum witnessed in 2020. Riding on a bigger number of deals amid the historic low interest rate environment, the amount represented an increase of 19.1% compared with US$94.08 billion in the same period a year ago, and the volume was the largest first-quarter ever recorded since 2010.

The higher volume was largely driven by the brisk deal flow in January with issuance amounting to US$60.73 billion as issuers and borrowers took advantage of the conducive issuance window and strong investor appetite. The level of activity also demonstrated a recovery in March with the total offering reaching US$27.47 billion, up 72.5% from US$15.92 billion in the corresponding period of 2020.

Based on the figures supplied by Refinitiv, a London Stock Exchange Grouo business, several markets manifested higher issuance volume in the first three months of this year with China accounting for over US$42.97 billion, or a market share of 38.3%. This was up from US$38.97 billion in January-March 2020, underpinned by offerings from investment-grade Chinese credits. Deal volume out of Hong Kong also rose from US$18 billion to US$21.95 billion during the same period, while that from South Korea doubled from US$5.90 billion to US$11.97 billion.

The deal flow during the period included the US$5 billion offering by Alibaba Group Holdings, which priced a four-tranche deal of 10/20/30/40 years in February amid the regulatory scrutiny in China. The 20-year tranche amounting to US$1 billion represented Alibaba’s first sustainability bond offering, achieving a highly competitive pricing with a spread flat to its 10-year tranche. This was also the first sustainability bond out of Asia from the technology, media and telecommunications (TMT) sector.

Another major bond trade during the period was printed by the Republic of Indonesia, which kick-started the sovereign issuance from Asia this year on January 5 with  US dollar and euro bond issuances totalling US$4.3 billion equivalent.

High-yield G3 bond issuance, meanwhile, was down in the first quarter of this year with a total volume of US$24.35 billion, compared with US$26.33 billion in the same period of 2020. Several markets recorded lower issuance volume during the period. China, the biggest high-yield bond market in the region, registered a total amount of over US$11.12 billion, representing a decline of 17.6% from US$13.51 billion in January-March 2020. Issuance out of Hong Kong also fell from US$6.26 billion to US$5.79 billion, while that from Indonesia plummeted to US$1.24 billion from US$3.06 billion during the same period. Issuance out of India, on the other hand, managed to buck the downtrend and recorded a bigger volume of US$4.60 billion, against US$3.31 billion in the first quarter of 2020.

The lower volume comes even as high-yield bond issuance staged a strong recovery in March this year with a total offering of US$6.05 billion, compared with only US$1.49 billion in March 2020.