Content area
Full text
A special report by HSBC Markets
I. MARKET OVERVIEW
US-based fixed income institutional investors purchased approximately US$511 billion of investment grade fixed income securities* during 1996. Approximately 18% of these funds were invested in securities issued by non-US borrowers - the Yankee market. In the first half of 1997, Asian issuers comprised 42% of the overall investment grade Yankee market, an increase of more than 200% over the same period last year. HSBC Markets estimates that there will be more than $80 billion a year invested in Asian Yankee bonds by the end of the century.
The US bond market has become an integral part of Asia's current and future funding programme. This market has provided Asian borrowers with significantly greater opportunities than the Eurobond market and is poised to continue its dominance well into the next century. Over the past 12 months Asian sovereigns such as China, Indonesia, the Philippines and Thailand have all accessed the US market to create benchmark status transactions. These benchmarks have created reference points that have allowed and will continue to allow a greater number of the leading domestic corporations and banks to access the US market. Clearly the sovereigns within the region have identified the strategic importance of the US as a source of capital to fund Asia's continued growth.
Over the 12 months ending June 1997, Asian issuers have raised in excess of US$23.5 billion in the US market in more than 80 separate transactions from eight different countries. This is an increase of 18% over the same period last year. The credit ratings of the issuers have ranged from BB- to AA- and the maturities extended out to 100 years.
The most commonly asked question by Asian issuers who are evaluating the US market is how to ensure that their offerings are successful. There have been several cases where an issuer was forced to postpone an offering, settle for shorter maturities than originally planned or even withdraw the transaction from the market altogether. Some transactions encounter market difficulties that are beyond the control of the lead manager. In other cases difficulties are caused by competitively-induced overly aggressive pricing, a lead manager distracted by other transactions in the domestic US market, a co-management group insufficiently...