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More Asean companies tapping US$ bond markets as they go offshore
SOUTH-EAST Asia's companies are tapping more funds in the international market, a sign of their global ambitions.
And that means more business for banks which are active in the international bond markets, said Aaron Gwak, Standard Chartered Bank head of capital markets, Asean.
In the first four months of 2017 Asean raised US$12.1 billion in the bond markets, according to Dealogic. For full-year 2016, Asean raised US$23.8 billion.
StanChart has been among the top banks in the Asean USD bond stakes. So far in 2017, it is No 1 with 12.7 per cent market share, though No 2 Citi is just a whisker shy with 12.6 per cent.
It's not just Asean which is raising debt in the international bond markets. Asia-Pacific excluding Japan has also been going gangbusters.
So far this year the US$144.9 billion of bonds sold in the Asia-Pacific excluding Japan is already 70 per cent higher than the same period last year. In this bigger arena, HSBC and StanChart are No 1 and No 2 with 8.1 per cent and 6.3 per cent market share respectively.
Since Mr Gwak joined StanChart in 2009, his mandate was to boost the sale of US$ securities, he told The Business Times in a recent interview.
"It's been a very fun ride from a USD perspective because we were able to do a lot more deals for clients as increasingly they are expanding and trading overseas," he said.
He said that the local bond markets where debt is issued in the domestic currencies, such as Indonesia, sometimes cannot give companies what they need. For instance, a geo-thermal plant had to buy components and raw materials from overseas so it made sense to match the funding in USD, he said.
In 2010, StanChart helped price a US$350 million deal for Indonesia's Star Energy Geothermal Ltd. The Indonesian geothermal power producer operates two power plants which form the largest single-unit geothermal plant in the country.
Of the 14 Indonesia offshore US bond issues since 2012, StanChart has done 11 deals.
For StanChart, Indonesia is No 1 in terms of volume in the Asean dollar bonds market due to its role in helping to sell jumbo USD billion bonds for the government.
In March this year, the Republic of Indonesia (ROI) sold a US$3 billion sukuk or Islamic bond, the largest ever sukuk to be issued out of Asia. StanChart acted as joint bookrunner for the deal.
Indonesia is one of a few select issuers in Asia with the credit strength and, with its familiarity with investors, is able to accomplish this large size in volatile market conditions, he said.
The transaction was StanChart's first deal for the Indonesian government in 2017 and third consecutive US$ issuance mandate. Last year, the bank had acted as a joint bookrunner on ROI's US$3.5 billion multi-tranche issuance in December and a US$2.5 billion sukuk in March.
Mr Gwak's other mandate is to improve its Singapore bond market business which has slipped in the past few years. In 2013 and 2014 Stanchart ranked 2nd in the SGD bond league table, behind market leader DBS.
Then over the next two years - 2015 and 2016 - OCBC Bank took the 2nd position pushing StanChart to 3rd place.
So far in 2017, StanChart ranks 4th - behind DBS, OCBC and HSBC.
"The SGD market we do care deeply about," said Mr Gwak who took over responsiblity for Singapore in June last year. "Market share isn't my goal," he said. "What's important is to do business by giving good ideas to clients."
He points to Lendlease's S$300 million bond sold in April, which was the Australian property company's first SGD bond issue since 2014 and its first international bond in 2017.
Capitalising on its strong brand name among investors, the Lendlease deal saw strong participation from institutional and private banking investors, resulting in an order book of more than S$1.5 billion.
StanChart acted as a joint lead manager and bookrunner for the transaction.
The SGD bond market is growing well and that's due to increasing participation from retail investors, and with more fund managers getting into the space, said Mr Gwak, who is very bullish on the SGD market.
"There is a paradigm shift to looking at bonds as safe investments.... and are good to build wealth on," he said.
2017 is a big year for refinancing with S$27.6 billion of SGD bonds coming due or up for first call this year, he said.
This is up from S$22.8 billion last year. In 2016, while S$22.8 billion was due, only S$17.8 billion was raised in the bond markets, he noted.
"Of that, foreign issuers issued about the same amount that was due - meaning that more names that call Singapore home are either paying off debt or refinancing via other means," Mr Gwak said.
"With underlying borrowing rates on the rise - especially with short-term rates - we expect this year to be a big year for bonds in SGD, and Standard Chartered Bank is in prime position to serve our clients as the leading foreign bank in this market," he added.