US subprime crisis hits Asia debt issuance
Friday, 30 November 2007
Robin Kwong and Raphael Minder,FT Syndication Service
HONG KONG: Debt-raising activity in Asia so far this month slowed to its lowest level since February last year, in a sign that market concerns stemming from the US subprime mortgage crisis have now caught on in Asia.
Companies in Asia, outside of Australia and Japan, raised just $26bn in 148 bond and loan deals in November, down nearly half compared with the same time last year, according to Thomson Financial.
Bond issuances have declined on a year-to-year basis since August, after the subprime crisis surfaced in July. Asian companies raised just $17.9bn so far this month, compared with $22.5bn in October and $38.6bn in November last year.
Paul Schulte, chief regional equity strategist at Lehman Brothers in Hong Kong, said: "The stress in the system is very clearly affecting Asian equity and credit markets, very suddenly and unexpectedly. What scares people is that there has been such a sudden and comprehensive increase in spreads in Asia, even though we are really talking about a western [credit] issue rather than Asian issue."
While Asian bond markets had emerged relatively unscathed from the US subprime concerns in July and August, the more recent market downturn has put a break on issuance in some sectors, most notably Chinese real estate companies issuing high yield bonds.
The problems are also acute in Europe and the US where the cost to borrow in the corporate bond markets has risen to a five-year high. Issuance in these markets has also hit record lows.
According to figures from Lehman Brothers, the spread or risk premium for financial and corporate bonds over safe government paper rose to the highest level in the dollar-denominated market since January 2003. In the euro-denominated market, Lehman said the spread was trading at about the highest level since November 2002, when WorldCom and Enron defaulted.
Dealogic, the data provider, said global bond issuance in the US and Europe for November was at its lowest level since 2001.
HONG KONG: Debt-raising activity in Asia so far this month slowed to its lowest level since February last year, in a sign that market concerns stemming from the US subprime mortgage crisis have now caught on in Asia.
Companies in Asia, outside of Australia and Japan, raised just $26bn in 148 bond and loan deals in November, down nearly half compared with the same time last year, according to Thomson Financial.
Bond issuances have declined on a year-to-year basis since August, after the subprime crisis surfaced in July. Asian companies raised just $17.9bn so far this month, compared with $22.5bn in October and $38.6bn in November last year.
Paul Schulte, chief regional equity strategist at Lehman Brothers in Hong Kong, said: "The stress in the system is very clearly affecting Asian equity and credit markets, very suddenly and unexpectedly. What scares people is that there has been such a sudden and comprehensive increase in spreads in Asia, even though we are really talking about a western [credit] issue rather than Asian issue."
While Asian bond markets had emerged relatively unscathed from the US subprime concerns in July and August, the more recent market downturn has put a break on issuance in some sectors, most notably Chinese real estate companies issuing high yield bonds.
The problems are also acute in Europe and the US where the cost to borrow in the corporate bond markets has risen to a five-year high. Issuance in these markets has also hit record lows.
According to figures from Lehman Brothers, the spread or risk premium for financial and corporate bonds over safe government paper rose to the highest level in the dollar-denominated market since January 2003. In the euro-denominated market, Lehman said the spread was trading at about the highest level since November 2002, when WorldCom and Enron defaulted.
Dealogic, the data provider, said global bond issuance in the US and Europe for November was at its lowest level since 2001.