Issuance Reaches 18.8 Trillion KRW This Year
Reports have emerged that the previously sluggish dollar-denominated corporate bond market in China is gradually reviving.
On the 18th, Yonhap News, citing Bloomberg News, reported that Chinese companies have issued approximately $13 billion (about 18.876 trillion KRW) worth of dollar-denominated corporate bonds so far this year. This is double the amount compared to the same period last year and the largest scale since 2022.
Previously, Chinese corporate bonds were mainly issued by financial institutions or companies linked to local governments. This time, companies related to real estate and others that had disappeared from the corporate bond market for years have successfully issued bonds.
The revival of the corporate bond market is interpreted as being supported by fierce competition among technology companies in AI-related fields and government measures to prevent defaults on real estate debts.
The media interpreted, "As concerns grow that former U.S. President Donald Trump's tariff policies could hinder U.S. growth, investors are turning their attention to other investment destinations."
Wei Liang Chang, a strategist at DBS Bank, stated, "Considering the scarcity of dollar-denominated bonds in Asian countries and the policy risks in the U.S., investors are welcoming the issuance of corporate bonds by Chinese companies." He also forecasted that the issuance of Chinese corporate bonds will increase further in the future.
The interest rate spread between dollar-denominated Chinese corporate bonds and U.S. corporate bonds has also narrowed significantly. According to Bloomberg's data, the interest rate spread on Tencent Holdings' corporate bonds maturing in 2029 was the smallest in five years recently. The average spread for lower credit corporate bonds was also at its lowest level in seven months.
Although most Chinese real estate developers are struggling due to debt restructuring and other issues, some companies are entering the market with new corporate bond issuances.
Beijing Capital Group, a Chinese state-owned enterprise, issued dollar-denominated corporate bonds for the first time since 2021. The company once had about 40% of its sales in the real estate sector. It issued $450 million worth of bonds, and the subscription orders were ten times higher than expected, resulting in an issuance yield 60 basis points (1bp = 0.01 percentage points) lower than anticipated.
However, there are also opinions that it is difficult to say that investment sentiment in China has fully recovered in this regard. Economist Gary Ng said, "Without the return of foreign investors, it is hard to say that investment sentiment has truly improved."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
