Northeast Asia

Given the low cost of debt, sluggish domestic growth and poor demographic trends, it is inevitable that international M&A will continue to increase as Japanese corporations’ management looks for growth beyond Japan to boost returns and growth prospects. This is good news for debt markets, which have also been boosted by an increase in the amount of share buy-backs.

Despite the problems that negative interest rates bring to a banking sector, Japan’s financial institutions have more to gain from a stronger economic environment than they have to fear from monetary policy. Given the progress they have made in strengthening their capital bases they appear well placed to see out such unhelpful policy, even if it lasts for longer than many hope.

Established in 2011 as a means of providing borrowers with easier access to a marginally more restricted investor base than the Samurai market, the Tokyo Pro-Bond market has had mixed fortunes in its five year history. While it has attracted a diverse range of borrowers, overall volumes have perhaps not lived up to expectations. The Tokyo Pro-Bond market has, however, firmly established its credentials as an alternative to the Samurai market, and market participants remain optimistic about its long-term prospects. Participants in the GlobalCapital Pro-Bond roundtable were:

Samurai issuance by borrowers from the Asia Pacific region fell from 47% in 2011, when Australian banks accounted for almost a third of issuance, to 16% in 2015. Nevertheless, it is clear that the region will have a key role to play in the evolution of the Samurai market in the years ahead. In the Asia Pacific Issuers Roundtable, borrowers discuss their experience in the Samurai market and look forward to likely developments over the coming few years.

It is one of the great ironies in the global capital markets that despite the long history of deep demand for ESG bonds in Japan, Japanese issuers have themselves been reluctant to issue.

In this round-up, the European Central Bank renews its RMB swap line, Swiss Re increases its RMB qualified foreign institutional investors (RQFII) quota, and CLS facilitates netting for RMB foreign exchange transactions. Plus, a recap of our coverage this week.

Investors welcomed the inaugural appearance from Hong Kong’s Television Broadcasts (TVB) in the dollar bond market. Hong Kong credits remain a rarity in G3 and the deal provided some nice diversity from a well-known brand.

China Citic Bank International bucked concerns about the health of the European banking industry, driven by Deutsche Bank’s financial troubles, to seal a $500m additional tier one on Thursday.

Institutions have spent months preparing for the launch of the new IMF special drawing rights (SDR) basket on October 1 since the decision to include the RMB was made last year. The mechanics include managing divergent onshore and offshore rates, Jukka Pihlman, global head of central banks and sovereign funds, Standard Chartered, and former IMF official, told GlobalRMB.

Bank of America Merrill Lynch and Goldman Sachs are taking a knife to their Asian investment banking operations amid slower capital markets activity and as competition from Chinese lenders intensifies. This is just the latest in a series of culls in Asia as global banks struggle to find a suitable model. Shruti Chaturvedi reports.

Five banks have clubbed together to supply a $300m three year term loan to Hong Kong-listed company Sino Biopharmaceutical.

A number of Asian borrowers are choosing to prepay their syndicated loans for various reasons, including a bearish outlook on growth. Their actions are compounding the woes of loan syndications bankers, who are already battling low deal activity, writes Shruti Chaturvedi.