The normally dynamic capital markets of North Asia were stagnant in 2023 compared with several years ago due to climbing US interest rates and rising geopolitical risks; and China, the largest economy in the region, unfortunately didn’t see an expected recovery after the country’s reopening at the beginning of last year.

The G3 bond market in China, according to data from Dealogic, contracted in 2023 with issuance size diminishing from US$81.7 billion in 2022 to US$46.4 billion in 2023. The high cost of US dollar financing had led many Chinese issuers to turn to the Chinese yuan bond market for their funding needs, including the dim sum (Chinese yuan offshore) bond market. Likewise, there were some major developments in the panda bond market as well with an increasing amount of foreign issuers looking to tap the onshore liquidity in China.

Panda bond issuance, according to data from Fidelity International reached around 150 billion yuan (US$21.1 billion) in 2023 the largest volume since the market’s debut in 2005. Last October, Arab Republic of Egypt issued a three-year sustainability panda bond worth 3.5 billion yuan (US$493.7 million) with a coupon rate of 3.51%. It was the first African country to issue a panda bond with proceeds expected to be allocated to inclusive growth and green objectives under the republic’s sovereign sustainable financing framework.

In Hong Kong, capital market activity was varied depending on the asset class. The inititial public offering market in the financial hub continued to struggle, with several companies looking to defer their public listing due to weak investor sentiment and concerns with China’s economy. This has resulted in the bourse recently falling behind India’s National Stock Exchange in market capitalization and now ranking fifth in the world.

Hong Kong’s bond market conversely has been fairly active, particularly when it comes to sustainable finance, with the Hong Kong government setting the tone with a couple of green bonds, including an eight-tranche multi-currency deal last January. This was followed by the Hong Kong Mortgage Corporation’s triple-tranche social bonds. The dim sum bond market was seen as a viable option in 2023 with several high-profile issuers tapping the market.

In fact, the value of dim sum bond issuances, Dealogic notes, doubled in 2023, with a total deal value of 243.9 billion offshore yuan (US$34.35 billion) compared with 126.2 billion yuan in 2022. Swire Properties, for example, issued its inaugural public green dim sum bond last July, which raised an aggregate amount of 3.2 billion yuan. This transaction marked the first Hong Kong corporate to return to the public dim sum bonds market since 2019.

While other markets turned to local currency financing, South Korean bond issuers, Dealogic finds, continued to tap the international markets resulting in the country surpassing China to become the largest G3 bond issuance country in Asia ex-Japan last year, with a total issuance of over US$50 billion. Whether it be debut, covered or sustainable-themed bonds, South Korean issuers continued to craft landmark deals and saw impressive demand from investors. Like other markets in the region, the focus on sustainable finance continued to develop in South Korea with issuers like KEXIM (Korea Eximbank) and Industrial Bank of Korea looking at blue bonds and gender equality-themed social bonds respectively.

Convertible bonds issuance was another theme for South Korea in 2023 with SK Hynix, the world’s second-largest memory chip producer, opening up the market last year when it raised US$1.7 billion via a convertible bond despite short-sell ban concerns in South Korea. The deal, which significantly reduced the financing cost of the company, saw significant participation from long-only investors. This was followed by other significant convertible bond deals, such as LG Chem’s US$2 billion trade, which was the largest equity-linked transaction in South Korea in the past 20 years.

Nevertheless, Taiwan experienced slower capital market development in 2023, particularly with the decline of its Formosa bond market. Total Formosa bond issuance proceeds, Dealogic notes, amounted to US$7.66 billion with 71 deals completed in 2023, which is only half of the deal numbers and proceeds compared with 2022. However, the market has shown some dynamism. An example was Société Générale’s largest retail Formosa bond issuance in Taiwan last year.

In addition, Taiwanese issuers from traditional industries are looking to reshape their businesses towards being more ESG focused. Taiwan Cement, for instance, issued the first green convertible bond issuance in Taiwan of US$420 million, and it saw significant participation from a number of ESG-focused investors. The fund will be used to support the company’s green transition, including battery manufacturing, energy storage and electric vehicle charging network.

These were some of the notable themes in North Asia observed by The Asset’s board of editors who are pleased to reveal the winners of the Sustainable Finance Awards 2024.

For the complete list of the Best Banks/advisers in North Asia please click here.

For the complete list of the Best deals in North Asia, please click here.

If you are interested in attending the awards gala for these awards, please contact [email protected].