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Tough year, but DBS pushes on to be go-to bank for Asia fixed income

Mr Lee: "(While) 2018 has certainly been a much tougher year than 2017, it also served to make us more focused, disciplined and sharp in reading the market."


IT's been a tough year for bond houses as choppy markets shrank investors' appetite for risk but DBS Bank has not let up in its bid to become the go-to bank for Asian fixed income, an arena dominated by western banks.

In particular it managed to punch through the incumbents' wall to clinch a front row seat for selling Indonesian bonds. Indonesia is the second largest issuer of US dollar bonds behind China in the Asia, excluding Japan, space.

This year has been particularly challenging for the credit markets, said Clifford Lee, DBS Bank head of fixed income. "The interest rate swings, emerging market sell-off pressures, trade war concerns and nervousness linked to China's earlier deleveraging plans resulted in unstable market conditions for most part of the year," said Mr Lee in a Business Times interview. This made bond issuance more difficult as is evidenced by the drop in new issuance volume by around 20 per cent.

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"(While) 2018 has certainly been a much tougher year than 2017, it also served to make us more focused, disciplined and sharp in reading the market when advising our clients to best protect their interests," he said.

DBS's ranking has moved up to 12 from 13 in the league table for Asia, excluding Japan G3 currencies (USD, euro and yen), where issuance has fallen 20 per cent.

In the slightly smaller Asia ex-Japan USD bonds table where issuance dropped by 22 per cent, DBS's position improved to 9th from 11th.

"DBS remains to be the only Asia headquartered bond house operating across Asia with deals done this year out of China, Hong Kong, Philippines, India, Korea, Singapore and Indonesia," said Mr Lee. The bank also did deals for issuers such as Japan Tobacco and Swiss-owned Trafigura.

A highlight for his bond team was "our prized inaugural 3-tranched deal for the Republic of Indonesia amounting to US$3 billion," said Mr Lee.

The Republic of Indonesia deal "was the result of several years of constant pitching and engagement where we provided accurate read on the market and investor sentiments," he said.

"The build-up of our credentials and track record in the G3 bond space also helped build our credibility to earn a much treasured place in this deal," he said. This year, DBS ranked sixth for Indonesia USD bonds, up from 10th previously.

Still DBS's market share slipped marginally in the G3 space, which Mr Lee said was "consistent with top bond houses in Asia due to changing market share make-up, especially for China deals".

HSBC, Citi, Bank of China and Standard Chartered Bank, which make up the top four banks in the bond league table, also suffered dips in their respective market shares.

China accounted for 67 per cent of Asia excluding Japan G3 volume.

Chinese banks and securities houses have increasingly muscled in on the fixed income business to the dismay of incumbents.

There are close to 20 new underwriters comprising Chinese banks and securities companies in 2018, which weren't in the market in 2017.

In 2018, DBS furthered its green thumb mission. It was involved in green/sustainable bonds for Indonesia's Star Energy, China General Nuclear Power Corp, Hong Kong's New World, State Bank of India and Korea Housing Finance Corp.

At home, DBS cemented its top position for Singapore dollar bonds, its market share rose to 38.5 per cent, from 35.3 per cent while total market issuance fell almost 12.5 per cent.

DBS's fixed income team though remains stable despite smaller volumes which means consistency for clients, he said. "No downsizing, we're tightly staffed," he said. "We continue to build our credentials... our track record continues to grow and DBS is considered a serious bond house alongside the western incumbents," said Mr Lee.