Opportunities in Asian Domestic Bond Markets: Crisis, promise and reality

Table of Contents

 

Executive Summary

  • Report highlights
    • Regional confidence tempered by international caution
    • Chinese momentum
    • Expectations in other markets
  • Mobilising the investor base
    • The need to free up the settlement system
    • Establishing a deep rates arena

 

Chapter 01    China

  • China’s domestic bond market: a meteoric rise
  • Viewpoint: Fergus Edwards, Head of Asia Syndicate, UBS, Hong Kong
  • A peculiarly imbalanced economy
  • Viewpoint, Chen Xing Dong, chief economist, BNP Paribas, Beijing
  • Short-term paper dominates the government market
  • Viewpoint, Paulus Mok, Head of Markets at Citi China, Shanghai
  • Mobilising the onshore investor base
    • Investment opportunities for offshore investors
  • Viewpoint: Frances Cheung, fixed income strategist, Greater China, Standard Chartered Bank
  • The China swap landscape
    • The launch of Shibor
  • Regulatory obstacles
  • Developing a credit curve: the rating agencies
  • Growth potential of the corporate bond market
    • Opening up the market
  • Viewpoint: Gina Tang, head of DCM Hong Kong and China, and Tony Rao, director DCM, global markets, HSBC
  • Case study: China Vanke
  • The MTN floodgates open
  • Viewpoint, Charlie Chen, managing director, Mega Trust Investment, Shanghai
  • The insurance sector: issuance to soar
  • Viewpoint: Charlie Ye, head of fixed income, UBS Securities, Beijing
  • Case study: People’s Insurance Group
    • SME issuance: attempting to close the financing gap
    • The potential of the Panda bond market
      • The need to open up to the international market
  • Foreign banks scramble for a piece of the China underwriting pie
  • Viewpoint: Neil Ge, head of China investment banking, Credit Suisse
  • Birth of a colossus: the China bank issuance market wakes up
    • A woeful shortage of capital
    • The need to boost banks’ capital structures
    • Tapping the senior space
  • Case study: China Merchants Bank
  • The subordinated space opens
  • Case study: Shanghai Pudong Bank
  • Whatever happened to China hybrid bank capital?
  • Hybrid Tier 1 guidelines: People's Bank of China management rules
  • The foreign bank gambit to take off in 2009
  • Fiscal stimulus to boost the infrastructure sector
  • China to create a municipal market

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Chapter 02    India

  • India’s slow pace of reform
    • The advantages of market ‘stodginess’
  • The global financial crisis exposes India’s economic fault lines
  • India’s Gsec market
    • Market reform
    • Gsecs casting a long shadow
    • The Gsec market as a source of alpha
  • The Indian bond market’s shortcomings: the offshore investor perspective
  • State government and agency bonds
  • The changing face of India’s investor base
    • Recent developments in issuance
  • Viewpoint: N Shankar, executive director, Export-Import Bank of India, Mumbai
  • India’s corporate bond market: unlocking its vast potential
  • Viewpoint: Indraneel Basu, director, Debt Capital Markets, IDFC-SSKI Ltd
  • Case study: ONGC Videsh
    • Taking the commercial paper route
  • Viewpoint: Rajeev Ahuja, head of investor sales & structuring, Citi, Mumbai
  • Reacting to crisis: the authorities act Viewpoint, Shashikant Rathi, credit analyst, Axis Bank, Mumbai
  • Case study: Tata Group
    • Success for Tata Steel
    • Problems for Tata Power
  • Viewpoint: corporate treasurer of a blue-chip Indian company
  • The Patil Committee recommendations
  • The ratings agencies: developing a credit culture
  • Corporate governance: in the spotlight
  • Developing the Indian swap market
  • Viewpoint: Munish Varma, head of global markets India, and Ananth Narayan, head of debt trading, Deutsche Bank, Mumbai
  • Case study: Idea Telecom
  • Indian corporate bond market prospects
  • Domestic bank issuance from India
  • Viewpoint: Deepak Kohli, global head of debt capital markets, financial markets, Standard Chartered Bank, Singapore

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Chapter 03    South Korea

  • Introduction: from one crisis to another
  • Another crisis, but with more room to manoeuvre
  • Viewpoint: Dr Jong-Wha Lee, head of the office of regional economic integration (OREI), Asian Development Bank
  • The KTB market
  • Efforts to improve the KTB market
    • The privileges and obligations of primary dealership
  • Viewpoint: Is it worth being a primary KTB dealer? Jason Oo, head of trading BNP Paribas Seoul
  • Korean interest rate and cross swap markets
  • Government bonds
    • Quasi-government issuance
  • Corporate bonds
    • The need to improve corporate governance
    • A solid ratings culture
      • Korea credit rating agencies
    • Challenges facing the Korean corporate bond market
    • Corporate bond issuance: where are the issuers?
  • Case study: SK Telecom looks to the dual currency funding approach
  • Tapping the short end: commercial paper
  • Viewpoint: JK Kim, head of funding, Export-Import Bank of Korea, Seoul
  • Korean domestic bank issuance: In the eye of the storm
    • Stress in the Korean commercial banking system
    • Liquid bank instruments
  • Viewpoint: Jung Sang Min, head of fixed income, Korea Development Bank
  • Case study: The Arirang and Kimchi markets – unexploited potential
    • An issuance opportunity?
  • Viewpoint: Deepak Kohli, global head of debt capital markets, financial markets, Standard Chartered Bank, Singapore
  • Opportunities for distressed investors in the Korean bond market
  • The bond market is central to Korea’s financial future

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Chapter 04    Hong Kong

  • Introduction: A sophisticated bond enclave
  • Managing bank liquidity: the Exchange Fund Bill and Note market
  • The government bond benchmark exercise
  • The non-government arena: a wide array of issuers
  • Pure corporate/quasi-sovereign corporate issuance
  • Viewpoint, Frank Kwong, head of debt syndicate, BNP Paribas Hong Kong
  • Offshore issuance at the mercy of the basis swap
  • Viewpoint: Sean Henderson, head of debt syndicate, HSBC, Hong Kong
  • Onshore and offshore bank issuance mines a rich seam
  • Viewpoint: John Te Wechel, head of funding at Commonwealth Bank of Australia
  • Supranational issuance slows
  • The hidden potential of the retail market
  • Viewpoint: Sam Quok, Treasurer, Airport Authority of Hong Kong
  • Renminbi in Hong Kong
  • Case study: China Development Bank opens the Hong Kong renminbi market
  • Government-guaranteed foreign issuance opens in Hong Kong 

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Chapter 05    Singapore

  • Introduction: liquid, diverse and user-friendly
  • The Singapore Government Securities market
  • Viewpoint: Clifford Lee, head of debt capital markets, DBS Bank, Singapore
    • Bond market liquidity
  • The dominant areas of corporate issuance
  • Viewpoint: Tan Kee Phong, head of DCM origination, Citi, Singapore
  • Confidence in the bank issuance market
  • Case study: Kexim
  • The statutory boards
  • Case study: SP PowerAssets
  • Islamic ambition: Singapore plans domestic Sukuk
  • Viewpoint: Deepak Kohli, global head of debt capital markets, financial markets, Standard Chartered Bank
  • Viewpoint: Charles Loh, senior director, global markets and investment, United Overseas Bank, Singapore

 

Chapter 06    Malaysia

  • Introduction: A model Asian bond market
  • The government market
    • Long tenor: Malaysian Government Securities
    • Short tenor: Bills
    • Islamic MGS
  • Secondary bond market liquidity
  • Viewpoint: head of debt capital markets at domestic investment bank Kuala Lumpur
  • Government-linked issuance
    • Khazanah: the sovereign wealth fund
    • Cagamas: the mortgage-backed issuer
  • Viewpoint: Steven Choy, president/CEO, Cagamas Berhad, Kuala Lumpur
  • The potential of the corporate securities market
  • Viewpoint: Soo Seo Han, head of debt capital markets, Aminvestment Bank, Kuala Lumpur
  • The offshore corporate gambit
  • Viewpoint: Deepak Kohli, global head of debt capital markets, Standard Chartered Bank, Singapore
  • A surge in Lower Tier 2 capital
  • Tier 1 capital: poised for a bonanza
  • The basis swap opportunity
  • Viewpoint: JK Kim, head of funding, Export-Import Bank of Korea, Seoul
  • Supras take the Malaysian route
  • Viewpoint: Deepak Kohli, global head of debt capital markets, financial markets, Standard Chartered Bank, Singapore 

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Chapter 07    Indonesia

  • A series of shocks: building Indonesia’s bond market
  • Indonesia government debt
    • Money market instruments
    • Waiting for the municipalities
  • Viewpoint: Apratim Chakravarty, Head, Global Markets HSBC Jakarta
  • Indonesian Islamic government issuance
  • Viewpoint: Dhanny Cahyadi: head of investment management and debt capital markets, Indonesia, ING, Jakarta
  • The corporate/FIG sector
    • Corporate issuance
  • Viewpoint: Florian Schmidt: head of debt capital markets, Asia, ING Singapore
    • Corporate issuance
  • Viewpoint: Robert Scholten: president director and country head, Indonesia, ING Jakarta

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Chapter 08    Thailand

  • The currency arbitrage nightmare of 1997
  • Building the Thai bond market
  • Government and corporate market liquidity
  • Government borrowing plans in 2009
  • The corporate bond market
    • Corporate issuance recovers
  • Viewpoint, Tan Kee Phong, Head of DCM origination, Citi, Singapore
  • The potential of the Thai private placement market
  • Viewpoint: Kunnigar Triyangkulsri, CEO, Barclays Capital, Bangkok
  • The domestic investor base
  • The foreign investor base
  • The attraction of the Thai market for offshore issuers
    • Offshore issuance meets domestic bank resistance
  • Commercial bank issuance on a roll
  • Viewpoint: Parson Singha, chief market strategist, HSBC, Bangkok

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Chapter 09    The Philippines

  • Introduction: Deficit country
  • Basic structure of the government securities (G-Sec) market
  • Philippines retail issuance comes of age
  • Problems in the secondary market
  • Viewpoint: Simon Paterno, Managing Director & Country Manager, Credit Suisse, Philippines
  • Banks dominate the investor base
  • Viewpoint: Denis Catalina, head of corporate finance, BPI Capital, Manila
  • Viewpoint: Nori Poblador, country representative Philippines, NM Rothschild and Sons
  • The disincentive of withholding tax
  • Lack of development of the corporate bond market
  • Case study: Ayala Corp
    • Underlying onshore potential
  • Case study: San Miguel Brewery
  • Viewpoint: Ramon Opulencia, Treasurer, Ayala Corporation, Manila
  • The booming Philippines bank issuance market

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Chapter 10    Taiwan

  • A long tenor liquid government arena
  • The short-tenor market
  • The liquid longer end: Taiwan government bonds
  • The illiquid corporate bond market
  • Case study: A model issuer – the Formosa Plastics Group
  • Onshore bank issuance
  • Viewpoint: Matthew Liaw, head of debt capital markets, RBS, Taipei
    • A wide range of investors
    • A supranational favourite
  • Case study: EBRD – the serial Taiwan bond issuer
  • Viewpoint: Isabelle Laurent, head of funding, EBRD, London
  • The tantalising proposition of Formosa bonds

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Chapter 11    Pakistan

  • Dynamic bond market growth
  • Viewpoint: head of capital markets at leading investment bank, Karachi
  • Sovereign issuance
    • The short end: Market Treasury Bills
      • National Savings Schemes
    • The medium to long end: Pakistan Investment Bonds
  • The sukuk experience
    • Potential knock-on effects
  • Limited corporate space
  • Viewpoint: Yousaf Bashir, Head of Pakistan Credit Markets Origination The Royal Bank of Scotland Limited, formerly known as ABN AMRO Bank (Pakistan) Limited 
  • Viewpoint: Farhan Hameed, senior economist, debt office, Pakistan Ministry of Finance, Islamabad
  • Viewpoint: Dr Ashfaque Hasan Khan, formerly Special Secretary of Finance and Director General of debt office, Pakistan Ministry of Finance

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Chapter 12    Vietnam

  • Introduction: the market of promise
  • The public sector market
  • Viewpoint: Kevin Snowball, Chief Executive Officer, PXP Vietnam Asset Management, Ho Chi Minh City
  • The need to expand the investor base
    • Offshore interest in Vietnam domestic bonds
  • Viewpoint: Jan Wipplinger, co-head of Asian debt syndicate, Deutsche Bank, Singapore

 

Appendix 01

ABF 2: reforming the local bond markets

  • Viewpoint: David Lynne, head of global rates Asia, Deutsche Bank, Singapore
  • Asean +3 move to establish ‘Asiaclear’
  • Viewpoint: Donald Amstad, director of business development, Aberdeen Asset Management Asia, Singapore

APPENDIX 02
Asian bonds data

  • 1. China bonds data
  • 2. India bonds data
  • 3. South Korea bonds data
  • 4. Hong Kong bonds data
  • 5. Singapore bonds data
  • 6. Malaysia bonds data
  • 7. Indonesia bonds data
  • 8. Thailand bonds data
  • 9. Philippines bonds data
  • 10. Taiwan bonds data
  • 11. Pakistan bonds data
  • 12. Vietnam bonds data

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LIST OF TABLES AND FIGURES

This report includes over 300 tables providing comprehensive data on areas such as: Government issuance and redemptions, corporate issuance and redemptions, government-owned corporate issuance and redemptions, and FIG, private-owned bank, MTN, senior, subordinated, Tier 1, Upper Tier 2, Lower Tier 2, hybrid, supranational and Islamic bonds issuance where applicable (deals and totals to 2012 where possible), plus lead bookrunner totals for each country.

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