Companies and governments in Asia are issuing dollar-denominated debt at an alarming rate in the first weeks of 2021, trying to take advantage of ultra-low interest rates to raise funds for acquisitions and offset losses during the new crown epidemic.
Asian dollar bond issuance climbed to more than $45 billion in the first two weeks of the year, according to Dealogic. That’s almost three-quarters of the total amount raised in the entire month of January 2020.
According to Ed Tsui, head of Deutsche Bank’s Asia-Pacific debt group.
The growth in volume is being driven by the current low level of interest rates, which provide bond issuers with an excellent opportunity to lock in low rates and raise long-term financing.
The wave of dollar bond issuance is expected to continue in the coming weeks.
Despite forecasts that corporate fundraising would slow in 2021 following last year’s record levels, the reality is that there has been a surge in issuance.
One of the huge bond issues this month came from South Korean chipmaker SK Hynix, with a $2.5 billion offering. The issue was the largest dollar-denominated debt issued by a non-financial company in the country, and it attracted orders worth almost five times the size of the issue. It will be used in part to finance the group’s $9 billion acquisition of Intel‘s Nand memory business.
Ed Tsui said low interest rates have prompted many issuers to refinance their existing debt with longer maturities. “Investors are definitely opportunists” and have a strong appetite for long-term debt, he added.
The Indonesian government issued $3 billion in 10-year bonds this month at a record-low interest rate of 1.9 percent. In addition, the Indonesian government issued 1 billion euros in euro-denominated bonds, both of which will be used in part to fund new vaccinations for the country’s 270 million people.
In Japan, bankers described all recent dollar-denominated bond issues by local companies as heavily oversubscribed, with Nippon Life completing a $1.6 billion 30-year subordinated bond issue last week at a record low yield of 2.75 percent.
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