The Business Times

Total outstanding debt arranged locally grows by 8%: MAS

Tan Nai LunYong Hui Ting
Published Mon, Sep 19, 2022 · 04:39 PM

SINGAPORE’S debt market registered a steady growth in 2021 as total outstanding debt arranged by financial institutions in Singapore rose by 8 per cent to S$523 billion, as compared with S$484 billion in 2020.

New debt issuance also went up by 4 per cent in the same period to S$232 billion, according to the latest Singapore Corporate Debt Market Report issued by the Monetary Authority of Singapore (MAS) on Monday (Sep 19).

Of the new issuances, S$202 billion, or 87 per cent, were denominated in foreign currencies, which were mostly US dollars. These were mainly issued by financial institutions, which were responsible for 64.9 per cent of the non-Singapore dollar debts.

Singapore-denominated issuance volume on the other hand, reached a 9-year high at S$30 billion. Corporate issuers accounted for the bulk of the debt as they made up 58.9 per cent of the Singapore-dollar-denominated debt market.

As with previous years, non-Singapore dollar long-term debt continued to form the majority of Singapore’s outstanding corporate debt volumes. This year, its value stood at around S$297 billion – or 56.8 per cent of the total outstanding debt.

Lim Teng Chong, senior research analyst of global fixed income at iFast Financial, said the figures were “not too surprising” as companies were rebounding from Covid-related lockdowns, and used the opportunity to raise funds during an environment of low interest rates.

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He noted that the low interest rate environment in 2021 allowed issuers to tap the Singapore bond market to raise funds at a lower cost.

Also worth noting is the volume of green, social, sustainability and sustainability-linked (GSSSL) bonds issued in 2021 – which grew nearly 4 times year on year to S$14.4 billion, up from S$3.8 billion last year. This represents a “significant growth in interest amongst corporates to raise financing for their GSSSL activities” as companies transit to a low carbon future, said MAS.

While 2020 and 2021 saw record-level issuances globally and in the region on the back of the monetary policy easing, low interest rates and bond purchases by major central banks, MAS expects global bond issuances to moderate in 2022 amid geopolitical and macroeconomic risks.

However, despite inflation being one of the key macroeconomic challenges, the Asian bond markets are likely to be driven by factors such as financing needs for the region to transit to a low carbon future and economic recovery from the reopening of Asia’s borders, MAS added.

“Singapore’s ecosystem of banks, investors, and professional service firms, as well as the digitalisation of bond market infrastructure, will enable us to support fundraising efforts in the region and help channel international capital to support Asia’s growth and net-zero transition needs.”

Market watchers expect that a key driver for corporate debt will be stability in areas such as inflation, interest rates, recession and geopolitical concerns.

Clifford Lee, global head of fixed income at DBS, said: “Rising rates, in and of itself, may not necessarily deter further growth of the debt markets. It is the wild and unanticipated swings seen this year that was the challenge.”

Meanwhile, Edmund Leong, head of group investment banking at UOB, expects a “flight to stability” will likely be a central theme in the market ahead – amid a volatile environment with rising interest rates, slowing economic growth and the Ukraine situation.

“Market participants will need to be more nimble, to take advantage of shorter windows of market stability to tap the bond market,” Leong added.

Additional reporting by Kelly Ng



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