4th - Asian Fixed Income Summit Investing in Asia s Fixed Income Market

Transcription

1 4th - Asian Fixed Income Summit Investing in Asia s Fixed Income Market September 217 Derek Armstrong Credit Suisse Head of Debt Capital Markets, Asia Pacific These materials may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Credit Suisse Group AG and/or its Affiliates (hereafter Credit Suisse ).

2 Issuance Volume Evolution of the Asia Bond market YTD Asia (ex-japan) G3 bond issuances US$(bn) 25 US$(bn) 1, High Yield Investment Grade Sovereign Cumulative volume (RHS) The Asian debt capital markets have rapidly evolved at a CAGR 34% from the depths of the GFC to an attractive asset class for investors and a well-developed source of capital for issuers Source: Dealogic

3 Record issuances volumes 217YTD Asia (ex-japan) US$ annual bond issuance volumes (US$mn) 2, 15, 1, 5, - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Driven by low benchmark rates and a search for yield, we have seen a record year in 217, with issuance volumes already at a record high for any full year historically. Source: Based on a selection of EM-dedicated bond funds sampled by Emerging Portfolio 2

4 Resilient Emerging Market Bond Fund Flows Weekly Emerging Markets bond fund flows Weekly Flows (US$mn) 3,5 Cumulative Flows (US$mn) 5, 4, 2,5 3, 1,5 5 2, 1, -5-1, Jan-17 Feb-17 Mar-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Weekly Flows (LHS) Cumulative Flows (RHS) Emerging Markets dedicated bond funds have seen 28 consecutive weeks of fund inflows. We have seen a cumulative US$48.7 billion of fund inflows year-to-date with only two weeks of outflows this year Source: Dealogic 3

5 Historical benchmark US Treasury yields Yield (%) y UST 1y UST 3y UST Source: Bloomberg Confidential 4 Credit Suisse AG and/or its affiliates

6 Historical benchmark US Treasury yields Yield (%) Y UST 1Y UST 3Y UST Current 1.76% 2.17% 2.75% Minimum.54% 1.36% 2.1% Median 4.14% 4.53% 4.96% Maximum 8.1% 8.36% 8.55% Median 3Y UST yield: 4.96% Median 1Y UST yield: 4.53% Median 5Y UST yield: 4.14% y UST 1y UST 3y UST Source: Bloomberg Confidential 5 Credit Suisse AG and/or its affiliates

7 Who are the issuers? Breakdown by geography 217YTD Breakdown by industry type 217YTD 8% 1% 5% 26% 8% 36% 6% 7% Total US$184bn 65% China South Korea India Indonesia Hong Kong Singapore Others 7% 6% Finance 9% Utility & Energy Government Total US$184bn 16% Real Estate Oil & Gas Other Despite regulations to curb the debt stock in China, Chinese issuers continue to account for the bulk of Asian issuance volumes Source: Dealogic Confidential 6 Credit Suisse AG and/or its affiliates

8 Who are the buyers? Breakdown by investor geography 217YTD Breakdown by investor type 217YTD 14% 12% 3% 5% Total US$184bn 74% Total US$184bn 52% Asia Europe U.S. 13% Fund Managers Banks Private Banks Others Significant participation by Asian investors in Asian bonds, with over 72% of deals issued in Reg S only format. In particular, Private Banking demand has become more prevalent Source: Dealogic 7

9 Indonesia s Progression to Investment Grade YTD JCI Index and Indonesia CDS performance JCI Index 7 Indonesia 5Y CDS Spread (bps) BBB- BB BB+ by Fitch by S&P BBBby S&P 1 BB by S&P 2 by Fitch Ba2 by BB+ Moody s by Fitch Ba1 Baa3 by by Moody s Moody s Jan-8 May-9 Sep-1 Feb-12 Jun-13 Nov-14 Mar-16 Aug-17 JCI Index Moody s Rating Action Indonesia 5yr CDS Spread S&P Rating Action Fitch Rating Action This year, Indonesia has attained investment grade status from all three international credit rating agencies, and we have seen Indonesia s 5yr CDS spread fall to an all time low of 16 bps. Indonesia is currently rated Baa3 (Positive) / BBB- (Stable) / BBB- (Positive) by Moody s / S&P / Fitch. Source: Bloomberg 8 6 8

10 Issuance Volume Indonesian Bond Market YTD Indonesia G3 bond issuances (US$bn equiv.) YTD Sovereigns / Quasi-sovereign Corporates We have seen a record volume of Indonesian corporate issuers come to the market this year as companies take advantage of the recent sovereign upgrade by S&P to BBB- and the strong market backdrop Source: Dealogic 9

11 Key takeaways Record issuance volumes driven by: Low benchmark rates Investor liquidity Global search for yield Private banking demand Resilient Emerging Market fund flows Asian investors have become more relevant as participation in Asian bonds continues to increase Indonesia s improving economy has resulted in record bond volumes this year 1

12 Credit Suisse does not provide any tax advice. Any tax statement herein regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. These materials have been provided to you by Credit Suisse in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Credit Suisse. In addition, these materials may not be disclosed, in whole or in part, or summarized or otherwise referred to except as agreed in writing by Credit Suisse. The information used in preparing these materials was obtained from or through you or your representatives or from public sources. Credit Suisse assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed or discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and Credit Suisse assumes no obligation to update or otherwise revise these materials. Nothing contained herein should be construed as tax, accounting or legal advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction. These materials have been prepared by Credit Suisse ("CS") and its affiliates for use by CS. Accordingly, any information reflected or incorporated herein, or in related materials or in ensuing transactions, may be shared in good faith by CS and its affiliates with employees of CS, its affiliates and agents in any location. Credit Suisse has adopted policies and guidelines designed to preserve the independence of its research analysts. Credit Suisse s policies prohibit employees from directly or indirectly offering a favorable research rating or specific price target, or offering to change a research rating or price target, as consideration for or an inducement to obtain business or other compensation. Credit Suisse s policies prohibit research analysts from being compensated for their involvement in investment banking transactions. 11 Copyright 217