Asian debt bankers are clearly not wasting much time. They toasted the first full week of the year by closing four dollar deals from Asia ex-Japan on Monday night, generating more than $29bn of demand for repeat issuers. They have now set their sights on bringing more new faces to the market this year.
This is not something that bankers struggled to do much throughout 2012, but several DCM bankers now predict that a lot more of their business this year will come from new names. This is only a natural — and welcome — step, but it does raise risks for bankers and clients hoping for a repeat of last year’s frenetic activity.
New issuers may offer more fees, although even this is not always guaranteed, but they clearly offer a tougher proposition too. It is not just a case of educating investors about new credits, but also ensuring issuers do not push their luck too far. This is not something banks can always manage, so it will not come as a surprise if a few deals end up on bank balance sheets this year.
But as long as new issuers are kept in line, now is an ideal time to bring them to the market. The risk of one deal making a roadblock for the wider market is minimal, at worst. Bond bankers proved last year that when roadblocks come, they can jump over them.
There were a few failed deals last year. Baoxin Auto Group, China Tianrui Cement, China ZhengTong Auto Services and XacBank were among the issuers that backed away from the bond market after meeting investors. But these pulled deals did little to stop bankers being able to lift volumes in Asia ex-Japan to more than $139bn, by far and away the biggest year of G3 bond issuance ever achieved in the region.
The same resilience will be on display this year. European investors are still going to move their holdings away from home, turning to Asia for high-quality assets as the credit quality of European names falls, as well as looking for riskier assets that still offer a chunky yield given the minimal default history in Asia’s bond market.
It’s rarely nice to be the new kid in class, but this year Asia’s bond market is proving an exception. It’s easy to make friends, people are happy to get to know you — and if you fall down, no-one will notice.