Weekly Market Outlook

Investors Are Snapping Up Asia’s High-Risk Junk Bonds

When it comes to Asia’s high-risk bond market, investors are unfazed by the threat of trade conflicts and currency wars.

Asian high-yield issuers are capitalizing on this exuberance, churning out almost $6 billion of junk-rated debt so far this year, the most since the same period in 2013, according to data compiled by Bloomberg.

It’s not just a pick-up in the amount of primary supply. The issuers have broadened, with South and Southeast Asian players joining the pipeline in the last few weeks.

“There is a sense of uncertainty entering developed markets with new political ideals emerging,” Chuanyi Zhou, credit analyst at Singapore-based Lucror Analytics, said in an interview. “Contrast this to positive outlooks for Indonesia driven in part by a reduction in its vulnerability to external events, while the attraction of Indian names is the ability to diversify into a country that maintains healthy growth rates.”

Asia bonds

Asia bonds

Late last month, Asia’s green financing received a boost from India-based Jain Irrigation Systems’ first foray into the offshore debt market. Another Indian company, ReNew Power, followed suit. It successfully wrapped up the sale of its 144A/Reg S outing this week.

Also this week, Jakarta-based Bukit Makmur Mandiri Utama has amassed more than $2.2 billion of orders for its $350 million notes, and Pakuwon Jati’s dollar-denominated offering was multiple-times subscribed too.

Asian high yield dollar bond spreads over U.S. Treasuries fell to a 3 1/2-year low of 434.9 on Jan. 26, according to JPMorgan Indices. It was at 442.6 Thursday.

Deutsche Bank AG’s Asia head of debt origination, Haitham Ghattas, expects the trend to continue because of “investors’ desire to diversify Asian high-yield portfolios and the need to invest ongoing inflows.”

“With U.S. Treasuries range-bound and subdued market volatility, current market conditions present an opportune time for regional high yield borrowers to access the debt capital markets,” he said in an interview.