The G3 bond market in Asia, outside of Japan and Australasia, continued its downward trend in the third quarter of 2023, with the total volume of issuance in the first nine months of the year declining further to US$144.64 billion from US$186.17 billion in the same period a year ago. This was the lowest nine-month volume in the region since issuance fell to US$123.63 billion in January-September 2013.

The continued decline comes as the issuance of ESG-related bonds (green, social, sustainability, sustainability-linked and blue) picked up this year as financial institutions and corporates heightened their focus on sustainability financing.

Figures supplied by Refinitiv show that G3 bond issuance in July-September this year amounted to US$41.42 billion, down 7.6% from US$44.81 billion in the corresponding period of 2022.

South Korea topped the league table with total issuance volume in the nine months of 2023 amounting to US$46.89 billion, up 24.7% from US$37.60 billion during the same period last year. Hong Kong also bucked the downtrend with a total issuance of US$18.12 billion, compared with US$16.16 billion in the comparable period of 2022. Issuance was also up in the Philippines at US$3.02 billion – excluding supranational offerings such as the Manila-based Asian Development Bank – compared with US$2.86 billion a year ago.

Much of the decline in the issuance volume was attributed to China, which plunged to US$38.14 billion from US$70.03 billion in the same period in 2022. Many Chinese state-owned enterprise issuers were still absent from the G3 bond market, while other corporates and financial institutions shifted to renminbi and local currency bond markets to meet their funding requirements.

Issuance out of Singapore also plummeted to US$6.64 billion during the period, from US$9.05 billion in the corresponding year-ago level. India also recorded a smaller issuance volume of US$4.53 billion this year, compared with US$6.79 billion in the first nine months of 2022.

High-yield issuance scant

The lacklustre volume in the Asia G3 bond market can also be attributed to the continued scant activity in the high-yield bond market, which posted a small volume of US$2.66 billion from seven deals in January-September 2023, according to Refinitiv, compared with US$8.93 billion a year earlier.

China, which used to dominate this space with its plethora of real estate issuers, only saw a single issuance amounting to US$300 million in the first nine months of 2023, compared with US$3.46 billion in the same period last year. The lone China deal was for Nanyang Commercial Bank, which printed in February Basel III-compliant additional tier 1 capital securities arranged by a total of 35 international and Chinese banks.

The biggest high-yield bond volume this year was registered by India with a total of US$1.28 billion, down 36.7% from last year, followed by Hong Kong with US$680.4 million (down 62.1%) and Malaysia with US$393.80 million (up 31.3%).

Meanwhile, issuance of G3 ESG-related bonds rose in the first nine months of 2023 to US$42.35 billion from US$40.56 billion in the comparable year-ago level. This comes as the issuance in the third quarter went up to US$11.50 billion from US$7.15 billion in 2022.

South Korean issuers dominated the league table with a total volume of US$15.76 billion, up almost 20% from US$13.14 billion in January-September 2022, anchored by the country’s leading financial institutions and corporates. These included the country’s first blue bond priced in January by the Export-Import Bank of Korea amounting to US$1 billion for 10 years, and a US$600 million social bond offering each by Industrial Bank of Korea in September and NongHyup Bank in June – both for five years.

The corporate issuances included the three-tranche offering by SK Hynix in March comprising of US$750 million sustainability-linked bond (SLB) for three years, a US$1 billion SLB for five years and a US$750 million green bond for 10 years. Korea Electric Power also printed a three-year US$1 billion sustainability bond in July, while LG Energy printed a dual-tranche green bond totaling US$1 billion in September.

Issuance out of China amounted to US$13.32 billion, down from US$18.74 billion in the first nine months of 2022. The issuers included the big banks led by Bank of China (BoC), whose Dubai branch priced in September a three-year US$500 million Belt & Road Initiative partner-themed green bond. BoC (London) printed another three-year US$600 million green bond also in September, while BoC (New York) issued a three-year US$500 million green bond in June.

In January, ICBC, through its branches in Hong Kong and Dubai, priced green notes both for three years amounting to US$600 million and US$900 million, respectively, while China Construction Bank (Sydney) issued a US$500 million green bond, also for three years.

Hong Kong was third largest source of ESG-related bonds as its issuances surged to US$8.79 billion in the first nine months of 2023 from US$1.17 billion a year ago with deals coming from, among others, the Hong Kong Special Administrative Region and Hong Kong Mortgage Corporation.

Syndicated loans favoured

Meanwhile, the syndicated loan market in Asia, outside of Japan and Australasia, was a bigger funding avenue for issuers and borrowers than the G3 bond market in the first nine months of 2023 with a total volume of US$344.20 billion – though the amount was 4.4% down from US$360.19 billion in the same period of 2022.

According to Refinitiv, China was the biggest borrower with US$154.01 billion, up slightly from US$153.85 billion a year ago. It was followed by Hong Kong with US$59.60 million (down 8.7%), Singapore US$37.36 billion (down 10.2%), Taiwan US$35.28 billion (down 14.6%), and India US$23.23 billion (up 32.8%).

There was also a bigger issuance of ESG-related debt in the syndicated loan market than the G3 bond market in the first nine months of 2023 with a total volume of US$52.15 billion. The amount, though, was lower than the US$65.14 billion recorded in the same period of 2022. Taiwanese borrowers dominated the league table with total volume of US$19.76 billion, or more than double the US$9.73 billion posted a year earlier. Hong Kong, on the other hand, suffered a huge decline in volume to US$9.48 billion from US$28.89 billion in January-September 2022. China followed suit as its ESG-related loans dipped to US$1.79 billion from US$6.34 billion during the same period.

The total amount of ESG-related loans raised out of Singapore reached US$14.76 billion during January-September 2023, a slight decline from US$15.96 billion in the same period last year.