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Asia racks up US$67.8b in debt issuance for Q3; up 18.2%

TOTAL debt issuance in Asia (ex-Japan, Australia and New Zealand) for the third-quarter stood at US$67.8 billion as at Sept 30, 2017, up 18.2 per cent year on year, according to Asia Securities Industry and Financial Markets Association's (ASIFMA) Asia Credit Report 2017.

While this represented a 14.6 per cent fall from the second-quarter (US$79.4billion), for the year to date, total debt issuance was US$230.8 billion, topping the US$204.7 billion in 2016.

ASIFMA, an independent regional trade association with over 100 member firms, accounted for all high grade, high yield, and unrated deals in its report.

The third-quarter also saw strong Asian market activity, while Western markets slowed during the traditional summer lull.

"US dollar debt issuance in the area has been fuelled by robust appetite in China, for bonds, especially those issued by Chinese groups in Hong Kong, as they expand their offshore business and diversify overseas," the report noted.

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ASIFMA said that this has driven issuance up for three of the past four summers, which might be a long-term shift, indicating the emerging dominance of Chinese issuers and investors in the market.

The rise in debt issuance in 2017 was also attributed to Asian companies locking in low borrowing costs in Asia's bond markets, driving record issuance in G-3 (Group of Three) currencies.

This comes in anticipation of a rise in interest rates following the US Federal Reserve's announcement to start "quantitative tightening".

However, the potential reduction in the size of the Fed's balance sheet will begin to reverse some of the quantitative easing that has been so supportive of bond prices in recent years, the report said.

"Looking ahead, this may have an impact on Asian bond markets (and indeed bond markets globally), more so given that secondary market credit spreads are at record tight levels."

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