I remember the pre-crisis years of 2004 to 2007, when the average issue size used to be USD30bn per year. Then came the GFC and the volumes fell to USD16bn in 2008. Since then, not only have the volumes sprung back with a vengeance, but have smashed all previous records. The new issue volumes shifted to around USD60bn for three years, 2009 to 2011,
and then more-than-doubled to USD130bn in 2012.
It so far looks like this year has started even stronger. At this rate, we can look forward to breaking the 2012 record this year.
When I look back, two trends stand out in Asian bond markets. One is the rise of China. Before GFC, China used to account for 10-15% of bond issues; just after GFC, the share rose to about 25%; and this year so far, it is 38%. Two factors are behind this phenomenon. One is the growth of the Chinese high-yield market, particularly the property sector. But equally, there
have been chunky large issues from Chinese state-owned investment-grade companies that are expanding their business overseas. A large share of these companies are in oil, gas, coal and other natural resources, and are raising funds for overseas acquisitions.
The other major trend in Asian issuances is the rise of high-yield bonds, which have gone from a pre-GFC share of about one-third to 43% this year. This increase is, of course, linked to the issuance of bonds by Chinese property companies.
While the rise of China is welcome in creating a large and viable asset class, it presents a challenge to investors as it reduces their ability to diversity, to which I alluded in the earlier