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Don't ignore Sing dollars once the summer lull is over

By Virginia Furness
26 Aug 2014

While the rest of Asia’s markets have been taking their summer breaks, Singapore dollars have been revving up. Recent deals have shown that the market can offer a strong alternative, with bigger sizes and longer tenors than dim sum — and even the opportunity to price through the dollar curve.

The Singapore dollar bond market has been on a roll. So far this year some 77 deals worth $11.1bn-equivalent have been printed by Asia ex-Japan issuers, according to Dealogic. There is less than half the year left, but bankers are still confident that full-year volumes are going to surpass the $22bn issued in the heady year of 2012.

Cross currency swap levels are not nearly as attractive as they were in that year, but activity in the Singapore dollar market has nonetheless been ramping up as others take their August holiday.

Just last week, on August 22, CapitaLand Treasury priced a S$350m ($280m) 10 year bond at 4.3%, proving that issuers can go both long and deep in the currency. The Singapore dollar market has several advantages for borrowers looking for alternatives, but size and tenor are the biggest plus-points. For the right name it’s not a struggle for borrowers to get funding of five years or more.

Corporate hybrids also gone down well in Singapore. There have been $4.8bn-worth of hybrids and perpetuals via 15 deals, according to Dealogic, with most of those issued in the last couple of years.

Compare that to offshore renminbi bonds, the other local currency market favoured by the region’s borrowers. A CNH bond of more than three years is greeted as a major achievement.

Choosing SGD is financially attractive, too. The Singapore dollar is appreciating against the renminbi, so investors holding debt in the currency are sitting on something more appealing. The increased demand means that issuers are also at an advantage, particularly while supply remains relatively limited. It’s quite possible for a borrower to print inside its dollar curve.

When Yanlord Land Group tapped the Singapore dollar market for S$400m in April this year, it priced 70bp inside its dollar curve, bankers reckoned. Arbitrage opportunities on that scale certainly aren’t open to everyone, but new issue premiums still tend to be on the smaller side.

Borrowers and bankers can often be sniffy about Singapore’s private banks and the rebates they expect in return for participating in a bond. But the city-state also has a large, sophisticated and expanding investor base. In CapitalLand’s recent transaction, some 115 accounts placed orders of S$2bn, with 59% of the print going to asset managers and insurers.

It's not all plain sailing, though. Singapore isn't open to every borrower under the sun, and international borrowers need to be able to count on some level of name recognition. But bankers have introduced plenty of new names to a hospitable buyside: Vanke Real Estate came to the market in 2013 to raise S$140m at 4%, while this year Far East Horizon and Pacific Andes have raised S$400m and S$200m respectively.

Investors are still hunting for higher yields, but are also still discerning as to currency and quality. With fewer names in the market, Asian corporates looking to raise funding in September may find that Singapore fits the bill nicely.

By Virginia Furness
26 Aug 2014