With offshore rates still elevated and governments seeking funding to support economic recovery, new-issue activity in local currency (LCY) bond markets in Asia remains on a growth trajectory, giving plenty of opportunities for sellside firms.
Emerging East Asia LCY bond markets, which expanded by 9.1% at the end March from a year earlier to top US$23.8 trillion, grew at a much faster rate when compared with their counterparts in the United States (+5.7%) and the European Union-20 (+2.9%), according to data compiled by the Asian Development Bank’s (ADB) Asia Bond Monitor.
These bond markets, which overtook the EU-20 in 2020 in terms of size, are now 66% of the US bond market at the end of March 2023. Much of that growth is attributable to the stepped-up issuance of treasury and other government bonds, the segment of the market where the activity of both offshore and domestic investors is concentrated.
The growing importance of Asia’s LCY bond markets is also reflected in the latest data from Asset Benchmark Research (ABR), the data analytics unit of The Asset, which has been tracking LCY bond markets for 24 years.
In this year’s ABR ranking of the Best of the Sellside, a total of 600 individuals received votes from investors, a record number. Of these, 198 met the threshold to be ranked; more than half (55%) have been winners for three or more consecutive years. At the same time, the number of investors who participated topped 550, which is another record number.
Especially in the first quarter of 2023, six out of the nine markets tracked by the ADB posted faster quarter-on-quarter growth compared with the previous quarter. The smaller markets were the standouts including Vietnam (+5.1%), Indonesia (+3.5%), and the Philippines (+3.1%). In total, the Asean markets’ issuance reached US$2.1 trillion at the end of March, accounting for 9% of the emerging East Asian LCY bond market.
In this year’s ABR Best of the Sellside ranking, Kobsidthi Silpachai of Kasikornbank is one of the most impressive. He has been ranked first in research in Thailand since 2014. Thailand’s bond market reached a size of 15.9 trillion baht (US$459 billion) at the end of March 2023, which is 2.1% higher than in the previous quarter. Interestingly, new-issue activity in the market was driven by the corporate sector. Thailand’s mix of government and corporate bonds is one of the most balanced with corporates representing nearly 29% of the total.
In Malaysia, another repeat top-of-the-sellside individual is Winson Phoon of Maybank, who began his unbroken winning run in 2015. It is a more difficult market for the sellside with LCY issuance contracting by 14.4% quarter-on-quarter due to fewer corporate bonds. Nevertheless, the overall size of the market by the first three months of this year reached 1.9 trillion ringgit (US$418.45 billion). Sukuk or Islamic bonds accounted for 64% of the total market.
Indonesia is among the LCY markets that offshore investors have poured funds into especially during the first half of this year as reflected in how the rupiah has outperformed its Asian peers. In this market, Handy Yunianto of Mandiri Sekuritas has been first or second in Indonesia research for the past eight years. While the size of the bond market reached 6,161 trillion rupiah (US$410.9 billion) at the end of March 2023, the share of corporate bonds is among the smallest in the region.
In Greater China, Becky Lee of Standard Chartered has held the top spot in research since 2017. In China, Jianheng Chen of CICC has been in the top three in research for the past five years. Despite the record outflow in the renminbi bond market during the past 12 months, China’s bond market is too big to ignore, accounting for nearly 80% of emerging East Asia’s bond market, or 130.3 trillion yuan (US$19 trillion).
As the economy undergoes a restructuring, pockets of activity are notable such as new issues of panda bonds (onshore renminbi bonds issued by foreign institutions), which hit a record in the first half of 2023, and dimsum bonds (offshore renminbi bonds), which also more than doubled in 2022, according to official data from the Hong Kong Monetary Authority. In Hong Kong, corporate bonds dominate, representing 48.5% of total outstanding Hong Kong dollar bonds, or HK$1.4 trillion (US$179 billion).
ABR Best of the Sellside tracks the views of fixed-income investors who are active in 10 Asian currency bond markets: China (onshore and offshore), Hong Kong, Indonesia, India, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. Every year, ABR invites investors to nominate the best individuals in the region's local currency bond markets covering the top economists, salespeople, and traders in the Asian currency bond markets.
For the full list of the region's best local currency bond individuals, please click here.
For the full list of the top sellside firms in Asian currency bonds, please click here.