The Covid-19 pandemic has forced businesses everywhere to change the way they operate, and IFR is no different. Originally scheduled as a face-to-face discussion, this year’s Outlook for Asian Credit Roundtable brought together a cross-section of market participants for a live webcast – a first for this publication.
The virtual discussion took place on May 20, as a recovery in Asian credit markets was beginning to take hold. After a record US$49bn of G3 new issuance in January, the coronavirus outbreak and lockdowns beginning in mainland China slammed the brakes on financings across Asia. At the height of the global sell-off in March, Asian issuers were frozen out of the international market for two weeks.
Since then, Asian governments and high-rated issuers have found investors willing to support long-term financings despite the uncertainty, and the gradual rebound in confidence has opened the door for lower-rated issuers to return.
Zhenro Properties, one of the most active international issuers from the Chinese property sector, was the first to reopen the high-yield market with a US$200m trade on May 14 – the first market-driven high-yield deal from Asia since March.
Despite the return of new issuance, the outlook for Asian credit remains uncertain. The pandemic has savaged the travel and energy sectors, eroded government reserves and raised questions for commercial real estate. Default rates are surging.
Asian issuance has also lagged a spike in the US, where US$256bn of new US dollar corporate bonds printed in March, an all-time high. In contrast, international bond sales from Asia are running at the same pace as 2019, suggesting that Covid-driven demand for funding remains unmet.
Pricing and execution have changed, too. Credit spreads have retreated from their March peaks, but remain well wide of January’s pre-Covid levels. While some sectors have recovered more quickly than others, opinion is divided on whether there is further to run. With no roadshows possible, deals are marketed entirely virtually, presenting another challenge for lesser-known issuers looking to engage with investors.
These themes, of course, are too wide-ranging to cover in any single discussion, but modern technology does allow a cross-section of market participants to present their views – and field questions from an online audience of close to 200 people – all in a safe and convenient format.
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