The Covid-19 pandemic is the biggest black swan event since 2008’s US financial crisis. But it is a crisis like no other, decimating economies across the globe. Governments in the Asia-Pacific region have responded by throwing together unheard of relief packages, the biggest in modern history. Years of fiscal discipline and prudent debt management, meanwhile, have given a number of countries some wiggle room. Indonesia and the Philippines, for instance, have tapped the offshore capital markets to raise funds as buffer for what is likely to be an uncertain road to recovery. These issuances, which were made at the height of the virus outbreak and achieved the lowest coupon ever, are an affirmation of global investors’ confidence. During this time, the ability to tap different pockets of liquidity is also critical.
One of the themes notable during the first half of the year was issuers launching bigger-sized and longer-tenor deals, which were uncommon in previous years. Another interesting feature in 2020 is the prevalence of green, sustainability, social, and Covid-19 bonds issued by a diverse range of companies from China, Korea, Thailand, the Philippines, and Indonesia. The pandemic-induced health emergency highlights the region’s need to do more to overcome the challenge of climate and social change, and pivot to a sustainable future.
The strength of the offshore capital markets is matched by the stability of the domestic markets. Bonds outstanding in emerging East Asia totalled US$16.3 trillion at the end of March 2020, representing an increase of 4.2% from end-December 2019 and 14% from March 2019. With funding requirements to remain elevated for the foreseeable future, the ability of governments to issue in their domestic markets will be critical, even as government bonds already account for the majority of local issuances, representing 60% of the market or US$9.9 trillion. Meanwhile, with social distancing, government treasuries are experimenting with new ways of distributing bonds, including using distributed ledger technology.
The Asset Events+ is pleased to be hosting the 15th annual Asia Bond Markets Summit on the theme – Asia’s capital markets: response, recovery, resiliency. The annual gathering of thought leaders and industry participants will discuss the implications of Covid-19 on the capital markets and the shape of the future of financing.