17 de mayo de 2015 / 15:05 / hace 2 años

Emerging bond funds scrambling for Asian debt in tight market

5 MIN. DE LECTURA

LONDON/HONG KONG May 17 (Reuters) - Emerging corporate bond funds searching for debt to buy up in the absence of Russian and Brazilian borrowers have found themselves jostling with a growing number of cash-rich Asian investors for new issues from the region.

Bonds from Asian companies, largely Chinese, are dominating the new dollar issue market now that once-prolific Russian and Latin American borrowers have been shut out by Western sanctions on Moscow, a corruption scandal at Brazil's biggest company Petrobras, weaker commodity prices and fears of a default in Venezuela.

Asian companies have stepped in to fill the void, accounting for almost 60 percent of this year's emerging corporate bond sales, having raised $70 billion as of the end of April, according to BNP Paribas. That's up from a 51 percent share last year and a meagre 17 percent in 2008, BNP says.

So far so good. But Asia's swelling pension and mutual fund industries have also created a huge new demand base at home, elbowing out the Western funds.

Greg Saichin, head of emerging debt at Allianz Global Investors, estimated that 60 to 70 percent of the average new issue in Asia is snapped up by locals.

"Some years ago the syndicates would come to Europe and the United States peddling these bonds and no broker would ever close the book before people in these latitudes had a look," he said.

"Right now, my feel is whatever is left of Asian issues for outside investors is between 20-30 percent - tops."

Allocations in some recent cases were filled almost entirely within Asia. For instance last week, Chinese bank CCB took orders of $7 billion for a $2 billion bond, 88 percent of them from local buyers.

Chinese Times Property's $280 million deal in March came from an overflowing book worth $1 billion, with 90 percent of the bids from Asia.

These volumes have lifted Asia's weight with bond investors, with China toppling Brazil as the biggest component of the CEMBI Broad and Diversified indexes, the benchmark for most investors in emerging company debt.

"If you are not effectively on the ball with eyes on the book, by noon you will have missed the bus," Saichin said

To compete with local buyers, more and more funds including his own are opening offices in the region, he said.

Reuters has reported that asset managers and banks have been adding staff in Asia.

A banker at a U.S. bank's bond syndicate desk in Hong Kong said Chinese investors were cash-rich now and some deals marketed recently had been placed within hours.

One reason is that Chinese, Korean and other local investors are keen to put cash into dollars as their own currencies weaken and interest rates fall. China's recent cut in banks' reserve requirements alone was seen unleashing 1 trillion yuan ($160 billion) into the economy and markets.

Priced to Perfection

For emerging markets, typically reliant on Western capital, the rise of a domestic investor base is undoubtedly positive.

In Asia, this is driven by savings pools that are seeing pension and mutual fund assets grow around 10 percent a year, according to consultancy PwC. Asia-Pacific pension assets will hit $6.5 trillion by 2020 and overall assets will reach $16.2 trillion, PwC predicted, more than double their 2012 levels.

Asia is already home to huge investors such as South Korea's $400 billion National Pension fund and Singapore's $200 billion Central Provident fund. Japanese pension funds are also investing more in emerging markets.

The downside for fund managers is that companies are able to minimise or even do away with the yield premium that new bonds typically pay to lure investors.

"You have the state-owned enterprises come out with new issues that price virtually on the curve, the concession they are giving is virtually zero. These are chunky issuances but they have been extremely well-absorbed by the market," said Nish Popat, a fund manager at Neuberger Berman.

Chinese refiner Sinopec, which raised $6.4 billion in five tranches last month, paid 3 and 5 basis points respectively over existing five- and 10-year dollar bonds. But orders for the $2.5 billion five-year issue surpassed $7 billion.

The Hong Kong-based banker said Asian funds, familiar with local borrowers, were willing to take lower yields.

"It is good news for issuers, and as a result the bonds are usually more allocated to Asian investors for the lower returns they ask for," she said.

Critics also say investors' eagerness may be blinding them to default risk, with coal firm Winsway this month becoming the third Chinese entity in 2015 to default on offshore bonds.

Meanwhile, Russian companies returning to the market will likely be welcomed by investors.

"There is still too much money chasing too few bonds," Saichin of Allianz said, adding he had passed on many Asian bonds which offered no yield concessions.

"This only builds up pent-up demand for later on as people are delaying investing." ($1 = 6.2051 Chinese yuan renminbi) (Editing by Hugh Lawson)

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