IFR Asia’s Frontier Debt Capital Markets Roundtable took place at a time of growing interest in frontier credit, as global investors look beyond the Covid-19 pandemic and step up their search for yield.
The coronavirus crisis underlined the role of the capital markets in supporting companies and governments through unprecedented challenges, providing low-cost, long-term liquidity that served as a buffer against the impact of the pandemic.
Asia’s frontier markets, however, have largely missed out on that flood of easy money.
Throughout the Covid crisis, several low-rated Asian borrowers found it hard to access offshore funding, even as their higher-rated peers have scaled up debt issuance. For governments, the G20 nations have offered debt relief, and the IMF stands ready to act as a lender of last resort, but both options come with political and technical challenges of their own.
That picture is changing. Mongolia returned to the US dollar bond market in October, and the Maldives was able to refinance its liabilities with an offshore sukuk earlier this year. Pakistan also printed its first international bond since 2017, pushing its curve out to 30 years, and investors have embraced lower-rated Single B credits, including a debut issuer from Vietnam.
This IFR roundtable brought together a mix of public and private sector speakers to discuss the future of international issuance from Asia’s less-developed economies.
The virtual session, held on June 14, also provided an update on the funding strategy of three experienced issuers: the Government of Mongolia, Republic of Maldives and Mongolian Mining Corp.
Participants discussed ways for lower-rated borrowers to maintain the support of international investors through the Covid-19 pandemic, as well as the pros and cons of multilateral initiatives such as the World Bank’s Debt Service Suspension Initiative.
The role of China and the IMF as lenders of last resort came under particular focus, as speakers from Mongolia and the Maldives offered contrasting views on the role of concessional support.
Audience questions ranged from the importance of ESG and a sustainability agenda to the risk/reward appeal of various Asian frontier markets.
Timing proved prescient. Days after the discussion, Mongolia announced plans for a new liability management exercise, seeking to buy back some of its outstanding bonds with the proceeds of a new US dollar offering.
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