The G3 bond issuance in Asia (ex-Japan and Australia) staged a strong recovery in January this year, with the volume amounting to US$31.86 billion as the issuers came back to access the market to raise funds.
According to figures supplied by Refinitiv, the amount was nearly double the US$16.20 billion raised in December 2018 and was the largest monthly issuance since April 2018 when the volume amounted to US$38.49 billion. The amount was also the second largest January volume during the past 12 years, after the US$39.49 billion total issuance in January 2018.
By country, China accounted for the largest volume in January with US$14.75 billion, down from US$16.72 billion during a comparable period a year ago. No issuance was recorded in Singapore during the month, compared with a volume amounting to US$1.34 billion in January 2018 for the city-state.
On the other hand, India and South Korea bucked the downtrend trend (vis-à-vis January 2018) with total issuances of US$3.19 billion and US$2.78 billion, respectively, up from their January 2018 totals (volumes of US$2.90 billion and US$1.10 billion).
The biggest recovery in G3 bond issuance was demonstrated in the high-yield sector with a total volume of over US$11.80 billion in January, compared with only US$3.37 billion in December 2018 and US$8.72 billion in January 2018. It was also the largest monthly volume in over a decade, exceeding the previous high of US$10.44 billion in September 2017.
The high-yield bond market suffered last year as investors shied away from the sector and issuers decided to stay on the sidelines instead of paying an elevated new issue premium. As a result, the total issuance volume in 2018 declined to US$44.94 billion from US$58.71 billion in the previous year, according to Refinitiv figures.
The bulk of the high-yield bond issuance in January was accounted for by Chinese issuers, which raised US$9.22 billion, while the Hong Kong high-yield deals amounted to US$1.50 billion. The rest of the issuances came from Macau US$600 million, Mongolia US$300 million and Indonesia US$175 million.
The biggest corporate G3 bond transaction in January was printed by Chinese property developer China Evergrande Group, which raised US$3 billion. The deal was actually a re-opening of the existing multi-tranche US$2.10 billion bonds and comprised of US$1.19 billion 2020 bonds, US$875 million 2021 bonds and US$1.025 billion 2022 bonds.
In accessing the market, China Evergrande had to pay up for the new bonds, offering a higher yield of 125bp over the previous 2020 bonds, 325bp on 2021 bonds and 225bp on 2022 bonds. The transaction was arranged by Bank of America Merrill Lynch, Credit Suisse, CEB International Investment Corporation, China CITIC Bank International and UBS.
Another significant G3 bond deal in January was the US$1.50 billion transaction by the Republic of the Philippines, which kick-started the sovereign issuance in Asia in 2019. It also represented the first emerging market sovereign US dollar bond for the year. Bank of China, J.P. Morgan and Standard Chartered were the joint global coordinators for the transaction, while Citi, Credit Suisse, Goldman Sachs and UBS were the joint bookrunners.
The other high-yield bonds arranged in January included those for Sunac China Holdings (US$600 million), Studio City Company (US$600 million), China SCE Group Holdings (US$500 million), China Aoyuan Group (US$500 million), Yuzhou Properties Company (US$500 million) and Fortune Star (BVI) (US$500 million).