G3 currency bonds are expected to increase by 30% this year
Standard Chartered expects the issuance of Asia's G3 currency bonds to increase by 30% year-on-year this year, reaching approximately USD 16.5 billion, about half of the issuance in 2021. The economic recovery momentum is not comprehensive, and in 2024, debt mainly reflects the demand for refinancing. Under high interest rates, companies tend to rely on bank loans rather than issuing bonds, especially large Hong Kong companies are relatively quiet in bond issuance activities. Taking Sun Hung Kai Properties as an example, it has obtained a HKD 23 billion syndicated loan, with a slight increase in interest rates compared to the 5-year loan earlier
Standard Chartered estimates that the issuance of Asian G3 currency bonds will increase by about 30% this year, reaching approximately $165 billion, which is only about half of the issuance in 2021, which was nearly $343.8 billion. Yan Shoujing, head of debt capital markets for Greater China and North Asia at Standard Chartered, stated that the current economic recovery momentum is not comprehensive. The main reason for bond issuance in 2024 is the restrained refinancing demand from this year and last year, with less capital expenditure (CAPEX) for expanding new businesses. Moreover, global interest rates are still at relatively high levels, so strong companies tend to supplement funds with bank loans to control costs.
Large Hong Kong Corporates Prefer Bank Loans
In recent years, the main issuers of high-yield bonds have been in the property sector, with limited foreign financing currently, and the bond issuance activities of large Hong Kong enterprises are relatively quiet.
Yan Shoujing pointed out that generally, large Hong Kong enterprises have strong cash flows, so they naturally would not issue bonds if they find the interest rates expensive. These companies can also obtain lower-cost loans from banks, hence reducing bond issuance.
For example, Sun Hung Kai Properties (00016) and Henderson Land Development (00014) have recently received syndicated loan support, with the former raising HKD 23 billion and the latter obtaining HKD 8 billion. Taking Sun Hung Kai Properties as an example, the interest rate for the 5-year syndicated loan is approximately HIBOR + 0.85 basis points, which is about 0.1 basis points higher than a 5-year loan in 2019. The company issued a $500 million 10-year bond in 2020, reportedly priced at U.S. Treasury bond yield + 2.1 basis points
