Asia's loan and bond markets have gone in opposite directions for much of the year. There were more dollar bonds sold in Asia during the first quarter than in any previous quarter. Not to be outdone, Asian loans bankers also set a record of sorts: they closed fewer deals in the first quarter than in any other quarter for the last two years.
Banks and corporations have increasingly turned to the public bond market for funding instead of relying on their relationship lenders. This has sparked fears among some bankers that they are seeing a permanent shift in Asian funding. But the bond market appears to have run out of steam for now— and loans bankers should be ready to seize their chance.
Lenders are starting to get hungry for exposure after a horrible start to the year, and the recent response to loans from Astra Sedaya, Sany Group and Tower Bersama, among others, has shown how much demand there is in the market. That will tempt bond-weary borrowers back into the market, and while club deals are still likely to represent the brunt of the business, syndicated volumes will also swell.
That could encourage bankers to push down pricing to win business, but this is something they should avoid. The need to attract a brought range of demand, in particular winning commitments in general syndication from Asia’s regional banks, means that syndicate officials should ensure that profit cannot — once again — be wiped out by a widening of bank funding costs.
But as long as loans bankers keep a level head, they will be in for a busy few months. Bond origination and syndicate bankers have had their fun — now it is time for the loan market to crash the party.