HSBC Tops Underwriter Rankings in Asia’s Record Dollar Bond Run

HSBC Holdings Plc captured the top share of the record $82.6 billion in U.S. dollar-denominated bonds that borrowers in Asia outside Japan raised in the first half to help pay for acquisitions.

Europe’s largest lender, which dominated the rankings in the past three years, underwrote 11.5 percent of the deals in the region, according to data compiled by Bloomberg. Citigroup Inc. remained second with an 8.9 percent share, while JPMorgan Chase & Co. jumped from fifth place in the previous six-month period to third with 8.7 percent.

Dollar bond sales by Asian companies soared at the start of the year after the average yield on the notes fell to near a record low at 4.51 percent in January, according to an index compiled by JPMorgan. Korea Gas Corp. was the region’s only issuer in the currency in the past three weeks as the Federal Reserve signaling it could reduce its asset purchases froze debt offerings. Global investors pulled out a record $23.3 billion from debt funds last week.

“There was a huge issuance at the start of the year when sentiment and demand for yields was pretty strong, so it was not only smart for bankers but also for companies to raise funds,” said Ashley Perrott, head of pan-Asia fixed-income in Singapore at UBS Global Asset Management Holding Ltd. “I don’t think we will have a multi-month freeze as all-in funding costs are still relatively low. It’s challenging to do too much in relation to new issues when there are outflows from funds.”

Borrowing Costs

HSBC and UBS AG managed the $1 billion bond issue by Hong Kong-based Citic Pacific Ltd. in May and had a share of Bharti Airtel Ltd.’s $1 billion offering in March. Citigroup helped underwrite the $4 billion bond issue by Chinese oil explorer Cnooc Ltd. in May, this year’s biggest deal.

The average yield borrowers in the region pay to sell dollar debt was at 5.71 percent last week, JPMorgan index data showed. The rate climbed to the highest since February 2012 at 5.84 percent on June 24, after the Fed hinted it could end its monthly bond purchases by mid-2014.

Asian companies outside Japan, including Shuanghui International Holdings Ltd. and Apollo Tyres Ltd. in India, have announced $77.8 billion of acquisitions in May and June, the busiest two-month period since the one ended Dec. 31, data compiled by Bloomberg show.

Bond Pipeline

No company in Asia outside Japan is marketing dollar bonds after Korea Gas raised $100 million of five-year floating rate notes on June 26. It was the region’s first offering in the currency since China Huaneng Group Corp. sold $400 million of 2018 notes on June 4, data compiled by Bloomberg show.

PT Berau Coal plans to sell dollar notes this year to refinance debt, the Jakarta Post reported today, citing finance director Scott Merrillees. The Jakarta-based coal producer has $450 million of July 2015 bonds that are callable on July 31. The 12.5 percent notes were sold in June 2010 and yielded 9 percent last week, according to data compiled by Bloomberg.

Elsewhere, the cost of insuring corporate and sovereign bonds in the Asia-Pacific region from non-payment rose, according to credit-default swap traders.

The Markit iTraxx Australia index climbed 3 basis points to 139 basis points as of 10:31 a.m. in Sydney, according to Westpac Banking Corp. The index snapped a six-week streak of increases last week, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 2 basis points to 152 as of 8:33 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge reached 178 on June 24, the highest close in a year, CMA data show.

The Markit iTraxx Japan index climbed 2 basis points to 112 as of 9:33 a.m. in Tokyo, Citigroup Inc. (C) prices show. The index is set to snap a four-day decline, which began after it reached a 16-week high on June 24, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporters on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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