Singapore Snubbed as China Rules Asian Dollar-Bond Market

Updated on
  • More Chinese issuers bypass city-state in investor roadshows
  • Chinese firms should consider building wider contacts: Nikko
Bloomberg’s Lianting Tu looks at China’s increasing influence in Asia’s dollar-bond market.

It’s been a banner year for Asia’s dollar-bond market, with an unprecedented pace of sales and dozens of debut issuers. But in Singapore, one of the region’s main financial hubs, there’s a note of gloom among its fund managers.

The tropical city is starting to get left out in the cold when it comes to marketing offshore dollar debt, in another sign of the increasing influence of China. At least 37 Chinese companies skipped roadshows in Singapore this year, out of the 136 that conducted investor meetings in Hong Kong, according to data compiled by Bloomberg. That’s a shift from the norm that prevailed over the past decade.

"It’s not an encouraging sign for me," said Leong Wai Hoong, a senior portfolio manager for Asian fixed income at Nikko Asset Management in Singapore. "They should consider establishing some contacts with a wider pool of global fixed-income investors.”

Leong said the change reflects the increasing buying power of Chinese funds, which are taking a bigger share of the buyer base in the region in the same way that China’s issuers are doing in the Asian dollar-bond market outside Japan.

With rising liquidity in dollars, Chinese banks and asset managers are able to take up issuance without borrowers needing to drum up foreigners’ money. That’s led to concerns over a concentrated investor base for some $477 billion in Chinese notes outstanding.

For Singapore-based investors, it makes it harder to sit down with the debt issuers. Leong said face-to-face meetings with managers from the borrowers are particularly important in performing due diligence on first-timers and higher-risk issuers.

Some of those skipping Singapore this year:

  • Junk-rated logistics service provider China Logistics Property Holdings Co., which only met investors in Hong Kong for its debut sale, a person familiar with the matter said in July. 
  • Unrated steel and chemical maker Liaoning Fangda Group Industrial Co. planned to only meet investors in Hong Kong on Nov. 21 while having a call with those in Singapore, people familiar with the discussions said earlier this month.

"While it is a current trend, we do not think it will be long lasting," said Leong Wai Mei, a money manager in Singapore at Eastspring Investments. "As Chinese companies mature, they will want bonds to be widely distributed," she said.

For his part, Geoffrey Zhao, head of debt capital markets for greater China at CITIC CLSA Securities in Hong Kong, says his team still generally encourages debut issuers, particularly high-yield ones, to visit Singapore as part of their roadshows. And most are still making the effort to swing by the city state.

The trend is shifting at a time when sales are picking up. Chinese companies have sold a record $169.4 billion of dollar bonds this year, accounting for 61 percent of greenback notes issuance in Asia excluding Japan, according to Bloomberg-compiled data.

Singapore-based investors still have it better than U.S. ones. The amount of Chinese dollar bonds that can be issued to American investors -- so-called 144A deals -- has plunged to 9 percent this year, from 67 percent six years ago, Bloomberg-compiled data show. Read more here about the increasing Asian dominance of this market.

For issuers, forgoing trips to the U.S. and Singapore means getting deals done faster. It’s just another sign of China’s rising clout, with its banks now holding more than $800 billion in foreign exchange.

“A lot of Chinese issuers are looking to cut their roadshow period shorter in order to get deals done faster,” said Raymond Chia, Singapore-based head of credit research for Asia ex-Japan at Schroder Investment Management Ltd. “Over longer term, this could be sacrificing getting more investors to understand the company better.”

— With assistance by Narae Kim, and Allen Yan

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