Investors snap up Samurai supply
Bonds Positive momentum continues despite tensions in global marketsBY TAKAHIRO OKAMOTOJapanese bond buyers
welcomed the chance to
diversify their portfolios last
week as rare issuers KT CORP and
WESTPAC BANKING GROUP added to
the rebound in Samurai bond
sales.
South Korean telecom
company KT followed up a
popular offering from state-
owned Export-Import Bank of
Korea the previous week with
a ¥20bn (US$187m) deal, split
between ¥4bn of 0.31% two-
year notes and ¥16bn of 0.38%
three-year bonds.The spreads over yen offer-
side swaps were 22bp and
27bp, respectively. This was
KT’s first Samurai issue since it
sold a ¥15bn three-year bond in
February 2015.
Although Kexim took ¥120bn
off the table the previous week,
KT was still able to draw good
demand from investors amid
improved sentiment towards
the region after the summit
between US President Donald
Trump and North Korean leader
Kim Jong Un in Singapore. Total
demand exceeded ¥40bn, but
the deal was capped at ¥20bn.
Appetite for foreign creditalso allowed French car maker
RENAULT to sell a ¥57.4bn
Samurai last week, despite
rising trade tensions that have
knocked credit spreads in the
European auto sector. ( See Japan
Debt capital markets .)
Asset managers and trust
banks bought both tranches
from KT, while the three-year
saw participation from regional
investors as well.
“Not every investor is 100%
okay with Korean bonds, but
the majority of investors show
strong appetite, especially
because of the recent supply
drought from South Korea,”said a banker on the deal. “I
think this trend will continue.”
Prior to last week’s Kexim
trade, there were only two
Korean Samurai deals in the
2016-2017 period: Hanwha
Chemical in 2016 and Shinhan
Bank in 2017.
KT started marketing in
three tranches of two, three,
and five years on Tuesday, with
the two and five-year portions
on a reverse enquiry basis. In
response to the demand for
short-dated paper, it decided to
issue the two-year and not to
print the five-year.
Citigroup and Daiwa were
the leads on the deal, which is
rated A–/A by S&P/Fitch.WESTPAC RETURNS
There was more supply fromChina curbs property bond sales
Bonds Developers face refinancing challenge after NDRC warns over short-dated notesBY INA ZHOU, CAROL CHANChinese property developers
are facing tighter scrutiny over
their offshore bond sales, after
an aggressive fundraising spree
triggered a warning from the
state planner.
The National Development
and Reform Commission last
week singled out developers
and local government funding
vehicles in a statement warningof the risks from overseas bond
issuance.
Bankers said the NDRC had
also discouraged issues of US
dollar bonds with maturities
of less than one year in
verbal guidance to some
intermediaries the previous
week.
Market participants said the
NDRC has come under greater
pressure to rein in developers’
access to foreign debt andfall in line with the central
government’s efforts to curb
surging property prices. China’s
housing ministry said last week
that it would crack down on
property irregularities in 30
major cities from July to the
end of December.
The latest measures threaten
to limit an essential overseas
source of funding for the
property sector, which has had
a very tough time accessing the
domestic bond market since
late 2016.
The NDRC clarified on Friday
that it had not considered
banning any companies from
issuing offshore debt, but
DCM bankers still voiced
concerns that the heightened
regulatory oversight would add
to refinancing risks in a bearish
US dollar bond market.
“The tightened scrutiny
will definitely increase the
refinancing risk in the property
sector, especially for those
weak Single B names, which
are likely to see some offshore
bond defaults this year,” one
banker said.He and two other bankers
noted the NDRC had tightened
new quota approvals for
developers and LGFVs,
particularly the weaker ones, amonth ago, reversing a looser
stance since the 19th party
congress ended last October.
They also reckoned that the
tightening measures would
support US dollar bonds from
the sector in the secondary
markets by cooling the pace of
supply.
“If there is going to be
a slowdown of new quota
approvals, it may actually helpNews
ASIAN USD BOND ISSUES WITH TENOR UNDER ONE YEARSource: IFR05001,1,2,2,3,3,4,4,Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Property issuers US$m Total US$m“If there is going to
be a slowdown of
new quota approvals,
it may actually help
existing quota holders,
and this could in fact
make bonds rally, just
like early last year
when there were no
new quotas approved.”