by way of yield or growth,” a
local analyst said.
BIG FLOATS
While foreigners shunned
TFF, they are looking forward
to some large IPOs next year
as Thailand remains a more
promising market than others
in South-East Asia.
The benchmark Stock
Exchange of Thailand index is
down 8.5% year to date while
the Thai baht has fallen 1.2%
against the US dollar. The
financial markets in regional
neighbours such as Singapore,
Indonesia and the Philippines
have weakened more in
comparison.
“Thailand is now being
considered a safe haven of
sorts in Asia. It’s one of the few
Asian economies with a current
account surplus and while
elections are due early next
year, we have been witnessing
a decent phase of political
stability,” the analyst said. The
country has been ruled by a
military junta since a coup in
May 2014.
PTT OIL AND RETAIL, a subsidiary
of Thailand’s largest energy
company PTT, plans to raise
around US$2bn through an IPO
next year.
Meanwhile TCC Group is
currently in the process of
hiring banks for a US$1bn–
$1.5bn IPO of its local property
unit ASSET WORLD CORPORATION and
also Central Group for its retail
business IPO of at least US$1bn.
Both floats are expected next
year.
A total of 4.5bn units were
sold in the TFF float. After the
IPO, retail investors will own
50% of the fund, Thai institutions
40% and the Ministry of Finance
10%. The shares start trading on
October 31.
Bank of America Merrill Lynch,
Finansa, JP Morgan, KrungThai
Bank and Phatra Securities are the
joint global coordinators on TFF
IPO. Japanese bond market
turning greener
Bonds Success of earlier issues and government subsidy
unleash more supplyBY TAKAHIRO OKAMOTOGreen bonds are becoming a
common feature in Japan, with
seven private companies and a
municipal government already
tapping the domestic market
since the beginning of October.
Leasing company TOKYO
CENTURY, rated A/A+ (R&I/JCR), was
the first out of the gate with a
¥10bn (US$89m) 0.20% five-year
Green bond. Things hotted up
in the second week of October,
with offerings from ANA HOLDINGS,
METROPOLITAN OF TOKYO, OBAYASHI,
MARUI GROUP, and DAIO PAPER.
Airline ANA, rated A–/A (R&I/
JCR), sold ¥10bn of 0.474% 10-
year bonds. Metropolitan of
Tokyo offered such bonds for
the second year in a row with
¥5bn of 0.02% five-year and
¥5bn of 1.004% 30-year bonds.
Construction firm Obayashi,
rated A+ by R&I, sold ¥10bn
of 0.13% five-year notes, while
retail company Marui, rated
A– by R&I, chose to issue one of
two tranches in a Green bond
format, selling ¥10bn of 0.19%
five-year notes. Daio Paper,
rated BBB+ by R&I, came with
¥15bn seven-year and ¥5bn 10-
year portions, with coupons of
0.605% and 0.864%, respectively.
Last week saw two additional
Green bond transactions from
JAPAN REAL ESTATE INVESTMENT, rated
AA by R&I, and FUYO GENERAL
LEASE, rated A–/A (R&I/JCR). Both
sold ¥10bn of five-year notes
with respective coupons of
0.23% and 0.21%.
Tokyo Century, ANA, Daio
Paper and Fuyo received
subsidies from the Ministry of
Environment, which is keen
to encourage Green bond
issuance. The ministry set up
the subsidy scheme earlier
this year to reduce the costs
and administrative burdens
of such bond offerings. The
subsidy covers the full cost of
an internal review, up to ¥50mper issue.
Ricoh Leasing was the first
to get the subsidy for its Green
bond in August, followed by
Hitachi Zosen in September.
The number of subsidised deals
now totals six.
A banker said some of
the surge this month can be
explained by the fact that
companies began preparations
after they saw successful trades
that priced late last year and
early in the fiscal year, and these
are now surfacing. “Some issuers
started preparing after they saw
the Green bonds sold by Toda in
December and Mitsubishi UFJ
Lease & Finance in April,” said a
Japanese DCM banker.
The ministry’s scheme is
adding to the momentum as
external reviewers are becoming
more familiar with it. Under the
scheme, it is external reviewers,
not issuers or bankers, who
apply for a subsidy. “External
reviewers are getting used to the
procedure,” said another DCM
banker.
The investor base is also
expanding as more and more
investors are seeking bonds
that support sustainable
development goals. Life insurers
are traditional Green bond
buyers, along with regional
banks, but the second DCM
banker said corporate investors
are also now showing interest,
including unusual ones such
as recycling companies.
Meanwhile, it is now common
practice for bankers to pitch
Green or Social bonds to issuers.
Green bonds do not
necessarily price at tighter levels
than traditional bonds, but
they benefit from good investor
demand. “A headwind is actually
blowing against the corporate
bond market right now because
of rising five-year JGB yields, but
selling five-year Green bonds
does not bother us at all,” said
the first DCM banker. For daily news stories
visit http://www.ifrasia.comhave been frequent issuers in
the local capital markets to
names that have just as strong
a credit standing,” said Ryan
Martin Tapia, president of
China Bank Capital Corp, the
investment banking subsidiary
of China Bank.
BPI Capital’s Bonoan expects
institutional investors such as
banks, insurance companies,
trusts and pension funds to
invest in the bonds.
FUNDING GROWTH
As the Philippine economy
continues to grow at around
6.5% per year, “the banking
sector will require substantial
sums to match the significant
requirements of infrastructure
initiatives”, said Alex Escucha,
senior vice president for China
Bank.
Therefore, domestic banks
are looking at all kinds of
instruments to supplement
their funding bases in order to
support strong loan growth at
mid-to-high teen percentage
points over the next 12-
months, according to Moody’s.
At the moment, Philippine
banks are primarily funded
by customer deposits. “Loan-
to-deposit ratios have been
steadily rising over the last five
years as loan growth outpaced
deposit growth. Due to the high
cash reserve requirement set
at 18% of deposits, Philippine
banks are supplementing
their funding mix with other
funding sources such as bonds,”
said Chen from Moody’s.
While local banks gear
up to tap the onshore debt
market, high rates could act as
a dampener. Annual consumer
price inflation rose to a nine-
year high of 6.7% in September,
which has prompted the
central bank to raise rates by
150bp since May 2018.
Moody’s expects more rates
increases over the next 12-
months. “Demand among local
retail and institutional investors
for bank-issued fixed income
instruments have historically
been strong, however investor
sentiment will be dampened
by the domestic inflationary
pressures and increasing
market expectations of rising
interest rates,” said Chen.