CHINA’S CORPORATE DEBT SALES OVERTAKE JAPAN

Published on July 3, 2009 by brooks | This story has been viewed 104 times

Chinese companies have for the first time issued more corporate bonds than their Japanese counterparts over the past year, marking another milestone in the development of China’s capital markets.

Record Chinese issuance in the first half also surpassed Japanese companies’ own record sales during this period.

The increase in Chinese debt sales, which has been a feature of the market for the past few years, partly reflects the incremental steps the government is making to expand the market. This was highlighted by the Agricultural Bank of China’s massive $7.33bn sale in May.

Fergus Edwards, head of debt syndicate in Asia at UBS, said: “Over the past five years we have seen Chinese domestic bond markets take incremental steps forward, adding both depth and sophistication.

“Importantly, the process for regulatory approval is now considerably faster and smoother than in the past.”

He added that many issuers thought it was sensible to lock in fixed rate financing at a time when interest rates are low and before volatility returned.

In the year to June, Chinese companies including financials issued $144.3bn worth of corporate bonds, compared with Japan’s $123.6bn, according to Dealogic data.

In the first half of 2009 alone, Chinese issuance was a record $96.7bn while Japan’s reached $76.3bn, the data showed.

The Chinese market has grown from $12.2bn in 2004 to $67.4bn in 2008, with a notable surge in issuance in 2007. “It’s important to remember that the pool of investable assets is relatively shallow in China which leaves relatively large pools of savings held in the banking and insurance systems; in turn this increases the funds institutional investors have,” said Mr Edwards.

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