Centurion bond investors brave volatile markets

Bond investors on Wednesday showed their mettle, giving a pretty decent reception to Centurion Corp's 3-year issue.

Centurion Corp's S$65 million 3-year bonds were priced at 5.25 per cent, lower than the initial 5.50 per cent area guidance as orders reached S$130 million, said Clifford Lee, DBS Bank head of fixed income.

The Centurion issue was the first Singapore dollar bond deal since last week as investors took a breather amid volatile market conditions.

The company, a dormitory provider initially wanted to issue S$50 million but due to demand upsized to print S$65 million, said Mr Lee. DBS is the sole bookrunner.

Private banks got 70 per cent of the deal, while banks and corporates took 16 per cent and asset managers accounted for 14 per cent of the deal.

This is Centurion Corp's second bond sale, it's first was a S$100 million issue in 2013, said Mr Lee.

Explaining bond investors' sangfroid amid panic in the equity markets, Mr Lee said credit people look at fundamentals.

"Nothing fundamental has changed in terms of the state of the economy, and there are no major defaults in China," he said.

Bonds which are defensive in nature also tend to do better in bear markets, he noted.

"That's because bond investors focus on income and bonds have a fixed life," he said.

This is unlike equity investors who are looking for capital gains, he said.

Over in Hong Kong where the "equity market has puked" said one observer, China Overseas Land International (COLI) also managed to sell 4-year 600 million euros (S$895 million) bonds.

COLI is a unit of China Overseas Land & Investment whose parent is state-owned China State Construction. China Overseas Land & Investment plummeted 10 per cent on Wednesday as the Hong Kong stock market crashed, with banks and property counters leading the plunge. The Hang Seng Index slumped 5.8 per cent, its biggest fall since the global financial crisis.

Mr Lee said COLI's bond sale had some anchor investors who would have considered the company's fundamentals.

DBS is a joint global co-ordinator, lead manager and book runner for COLI's issue.