HSBC Sees ‘Selective Opportunities’ for Asia Bond Sale Pick-Up

HSBC Holdings Plc sees some possibilities for a rebound in Asian bond sales this quarter, as three companies sold debt yesterday, the busiest day in a week.

The U.S. Federal Reserve’s decision to maintain bond purchases last month “provides some selective opportunities for a pick-up in Asian issuance,” according to Andre de Silva, head of Asia-Pacific rates in the global research team at HSBC, this year’s largest arranger of dollar bonds for Asian borrowers. Swire Pacific Ltd., the biggest shareholder of Cathay Pacific Airways Ltd., led three offerings yesterday, the most since Sept. 25, data compiled by Bloomberg show.

Asian companies slowed bond sales in the U.S. currency to $21.3 billion last quarter, 43 percent less than the previous three-month period, after Fed Chairman Ben S. Bernanke signaled the central bank would consider trimming record stimulus. The Federal Open Market Committee left debt purchases unchanged when it met last month, prompting dollar notes from Asian issuers to rally the most since July 2012, JPMorgan Chase & Co. indexes show.

“More stable currencies and more fundamentally sound countries, such as Korea, Singapore, Taiwan and Hong Kong, are likely to be more receptive to issuance,” HSBC’s de Silva said.

Swire Pacific

Hong Kong-listed Swire Pacific raised $700 million from a sale of 10-year bonds yesterday, data compiled by Bloomberg show. Korea Western Power Co. sold $500 million of notes due 2018, while First Gen Corp., the Philippines’ second-largest generator of conventional electricity, issued $250 million of 2023 securities, the data show.

Industrial & Commercial Bank of China Asia Ltd. remains in the market with a Basel III-compliant offering of 10-year subordinated bonds that can be called after five years, a person familiar with the matter said today. The lender is considering pricing the debt with a spread in the mid-300 basis-point area, the person said, asking not to be identified because the terms aren’t set.

The Fed is now on track to taper stimulus in December, with a “modest” $10 billion reduction in quantitative easing likely, HSBC’s de Silva said. The U.S. budget deadlock and government shutdown won’t impact this timeline, provided it’s resolved in days rather than weeks, he said.

Australia Risk

The cost of insuring company bonds in Australia against non-payment climbed today, according to traders of credit-default swaps.

The Markit iTraxx Australia index rose 1.5 basis points to 122 as of 10:13 a.m. in Sydney, according to Westpac Banking Corp. prices. The measure is rebounding from a four-month low of 103 on Sept. 19, according to data from CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index meanwhile retreated 2 basis points to 92.5 basis points as of 9:13 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge is set for its lowest level since Sept. 26, CMA data show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 152 basis points as of 8:13 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show.

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.

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