2017 is a significant year in the history of Asia’s financial markets. It is now 20 years since the devaluation of the Thai baht marked the beginning of a crippling financial crisis that rippled across Asia. It’s also 20 years since Hong Kong returned to Chinese rule, following the handover of the former British colony. IFR Asia is also 20 years old this year. The first issue came off the presses on March 8 1997, less than four months before the Thai currency crisis hit in earnest. As events unfolded later that year, it’s hard to imagine that...Read more
To purchase printed copies or a PDF of this report, please email leonie.welss@lseg.com and shahid.hamid@lseg.com
Twenty years after the Asian financial crisis, the region’s economies are stronger and its finances more secure. While lessons have been learned, however, some flaws remain unresolved, and China’s dominance has brought with it new risks.
Twenty years after colonial rule, Hong Kong’s relationship with China is once again a source of anxiety.
Asia’s investment banking industry has been through its fair share of upheaval over the past 20 years, and regulatory pressures and rising competition are adding to the challenges. What does it take to be successful in Asian banking today?
Financial technology is upending supply chains and payment systems around the world, but has yet to disrupt major capital financing. Will it ever transform the primary capital markets?
The impact of financial technology companies on the traditional banking sector will depend on the attitude of regulators, says Avinder Bindra.
The rise of financial technology has brought banking to a critical juncture, where incumbent institutions must adapt to stay relevant, says Piyush Gupta, CEO of DBS Bank.
IFR Asia’s first issue came off the presses on March 8 1997, and painted a mixed picture of pre-crisis Asia. While Indonesia’s capital markets were clearly roaring, things were already looking rocky in Thailand. Top story was a colourful feature on Indonesia, detailing “flagrant abuses” of the emerging domestic market for MTNs. “We once bought US$80m of a US$100m dollar issue from an MTN programme, but then found out that someone else had bought US$70m of the same programme,” a US banker in Singapore was quoted as saying. Who cared about...
Only months after IFR Asia’s first issue in March 1997, Thailand had given up on its currency and the Asian financial crisis was in full flow. IFR Asia was left asking the same questions as many of its readers: what do we do now?
We asked some former colleagues for memories of their time at IFR Asia. Happily, they haven’t forgotten how to tell a good story
In 1995, I relocated to Hong Kong from London, where I was reporting on UK and European equities for IFR, to help launch a sister publication covering Asia’s rapidly developing capital markets. For a British national, the promise of witnessing the divestment of one of the last vestiges of empire in the return of Hong Kong to China in 1997 was too good to resist. Notwithstanding the uncertainties attached to the projects, both the launch of IFR Asia and the handover of Hong Kong passed without incident. But by July 1997, Asia’s economic skies...
IFR Asia asked market participants to predict what might happen in the next 20 years. We quickly found that nobody was brave enough to put their hopes and fears on record, so we did it ourselves. We stand by our predictions 100%, as long as they come true. If not, then they were all just a bit of a laugh.
The boom in Asia’s capital markets came to a shuddering halt in the second half of 1997, only a few months after IFR Asia’s first issue. One by one, central banks across Asia were forced to float their currencies, triggering huge devaluations and mass defaults. By the end of the year, Thailand, Indonesia and South Korea had all turned to the International Monetary Fund for assistance.
Despite that horrendous backdrop, Asia’s capital markets continued to produce landmark deals. China Telecom’s Hong Kong listing ushered in a new wave of major red...
China Telecom’s 1997 IPO is remembered as a pivotal moment in China’s engagement with the global capital markets, smashing size records and sowing the seed for big listings from the country’s public sector. The origins of the deal, however, trace back to Hong Kong’s red-chip fever in the mid-1990s. Red chips, the name for Chinese companies incorporated overseas and listed in Hong Kong, have played an important part in Hong Kong’s market development in the past 20 years. The first batch of IPOs emerged in 1992, giving overseas investors their...
The turmoil in South-East Asia claimed its first victim in Hong Kong at the beginning of 1998, when homegrown investment bank Peregrine’s aggressive underwriting in Indonesia led to its downfall. The trouble spread, however, and by August the Hong Kong government was forced to intervene to prop up local stocks.
South Korea quickly restored its access to global markets, after a giant bailout loan from a group of US banks and G7 governments on Christmas day 1997. China, meanwhile, was in danger of losing its own international window after allowing...
While the dominoes were falling across Asia, Taiwan weathered the Asian financial crisis relatively well. The island’s economy did slow from 6.7% growth in 1997 to 4.6% in 1998, but that was by far the highest of any of its Asian neighbours – most of which slumped into recession. The central bank was forced to release its grip on the currency, and inflated stock prices took an initial tumble in the 1997 rout, but recovered relatively quickly. In the 12 months to June 1998, the stock price index fell 16%, versus more than 40% in Singapore and...
Deals began to flow again in 1999, at least in North Asia. China’s red chips resumed their overseas march through the Hong Kong IPO market, and governments began looking to sell down the investments they had been forced into at the height of the crisis.
The word “cornerstone” first appeared in a Hong Kong IPO report early in 1999, when Shandong International Power Development (now known as Huadian Group) sold 40% of the deal to US utility Southern Energy. The cornerstone practice wouldn’t catch on in earnest for a few more years, but the early...
Securitisation played a part in Asia’s recovery, too, helping banks and governments recycle balance sheets and offload risk. Structured financing survived test after test in the region, from the Asian financial crisis to consumer credit blowups, before the US subprime disaster finally put paid to any mainstream ambitions. South Korea’s first asset-backed deal since the crisis, priced at the end of 1998, was a turning point in bringing investors back to Asia’s emerging markets. The Export-Import Bank of Korea successfully sold US$225m of...
Enthusiasm for all things tech took hold of the Asian capital markets, as it did around the world, pushing investors into decisions that were not always, well, rational. Hong Kong hosted two of the most memorable, top-of-the-market trades of the dotcom era. Li Ka-shing’s foray into the internet sector triggered frenzied scenes across town as retail investors fought – literally, at times – to get their hands on shares in
Tom.com, a start-up with the sketchiest of business plans. Second son Richard Li’s audacious bid for Cable & Wireless HKT...
PetroChina’s IPO in April 2000 opened the floodgates for jumbo Chinese state-owned enterprises looking to access overseas equity capital. In proving investors would support a major listing in H-share format, the deal paved way for the many IPOs of Chinese lenders and insurers that would transform the Hong Kong market in the years to come. H shares, Hong Kong stocks from Chinese companies incorporated on the mainland, first emerged in 1993 when Tsingtao Brewery led a batch of nine SOE listings in the city. It was not until April 2000, however,...
Having retained access to the capital markets throughout the crisis, Asia Pulp and Paper eventually threw in the towel in March 2001, calling a standstill on a staggering US$12bn of debt in the world’s biggest corporate emerging market default. APP’s move triggered fraught scenes as onshore and offshore creditors battled to enforce their rights, at one point marching into the offices of a subsidiary with a list of demands.
Things didn’t get much better in the second half of the year, as Asian markets were knocked by Argentina’s debt troubles and...
Japan’s asset-backed market was the source of intense competition in the early 2000s, to the extent that issuers sometimes found it hard to choose between rival arrangers. Government Housing Loan Corp, the Japanese equivalent of Fannie Mae in the US, took the contest to an extreme when it was preparing its first issue of residential mortgage-backed securities – a trophy mandate for any aspiring bank. “We bid a ridiculously low fee to get on the deal, but we ended up level with another house,” said Raj Shourie, head of asset finance for Asia...
Good news has outweighed bad in Australia for far longer than IFR Asia has been around, with the country now recession-free for almost 26 years straight. The combination of a natural resources boom, a banking oligopoly and – perhaps most importantly ¬– the effect of a desirable climate on house prices has contributed to strong and stable growth. The Aussie capital markets have played their part in this golden era, too, weathering global crises that brought many other economies to their knees. But was this outstanding record ever in danger?...
Having limped along since the financial crisis, South-East Asia was back on its feet by mid-2002, with a series of significant capital raisings completed in a matter of weeks. In Malaysia, where the imposition of capital controls at the height of the crisis had left international investors outraged, mobile phone operator Maxis reopened the market with the country’s biggest IPO in 10 years. Days later the government sold the world’s first sovereign Islamic bond in US dollars, putting Malaysia firmly back on the capital markets map.
Singapore,...
Asia’s debt restructuring scene has been one of the most colourful sectors of the financial markets in the past 20 years. In IFR Asia’s early days, one South-East Asian issuer was known to open creditor meetings by placing a loaded pistol on the table. On another occasion, a bus deposited a bunch of stick-wielding thugs outside a company building where discussions were taking place, and some foreign creditors were forced to climb a barbed-wire fence to get away. One investor remembers being threatened with a shark tank when attempting to...
Severe acute respiratory syndrome, to give Sars its full name, spread around the region in early 2003, leading to deals being called off and bankers quarantined. With the war in Iraq and a consumer credit bust in Korea, confidence looked for a time to be irreparably damaged.
But sentiment turned over the summer and deals soon started to flow once more. The Thai and Indonesian privatisation programmes restarted. Even Chunghwa Telecom finally managed a successful deal – surely a sign that anything was possible. The international bond markets...
Hutchison Whampoa’s US$5bn three-tranche bond issue, launched in November 2003, stands out as a key moment in the development of the Asian bond market. The deal remained Asia’s largest dollar bond offering for more than a decade, until Sinopec matched the size in 2014 and Hutch beat its own record later that year. “It was the first time an Asian issuer had done a deal that stood shoulder to shoulder with the top European and US issuers in terms of size,” said Stephen Williams, head of global banking for South-East Asia at HSBC. The Hong Kong...
Risk-taking was back on the agenda in 2004 with a collection of new listings from Asia’s technology sector, including a US$200m Hong Kong IPO for a little-known Chinese company called Tencent. The bond markets also welcomed exotic new industries, allowing Toronto-listed Sino-Forest to make its debut, and Las Vegas Sands opened the first foreign-owned casino in Macau, repaying its project costs within months.
Appetite ran so hot, in fact, that Hong Kong’s first REIT listing triggered a backlash from institutional investors who all wanted to be...
Outbound Chinese deals moved to another level in 2005 as industry leaders and newly commercialised banks looked to raise their global profile. Bank of Communications and China Construction Bank had investors rushing to subscribe to their Hong Kong listings, while computer maker Lenovo transformed perceptions by showing that China could take over a well-known global brand.
The global bond markets opened up for Vietnam, paving the way for an investment boom in the frontier market over the following year, and the Philippines was finally back in the...
The Philippines’ equity capital markets have minted several new billionaires over the past decade or so, but it was the modest listing of a lowly public utility in 2005 that started the flow. The Ps5.1bn (US$94m) float of Manila Water in February 2005 was the country’s first major IPO since the Asian financial crisis. The stock jumped 16.9% and closed 6% higher on its first day of trading, helping build confidence for the far bigger float of Henry Sy’s SM Investments two weeks later. “It was a very small deal but marked the return of...
Growth capital was very much the flavour of the year throughout 2006, as companies across Asia turned to the equity markets and overseas acquisitions in search of expansion opportunities. Two more Chinese banks sealed massive Hong Kong listings, culminating in ICBC’s world-beating US$22bn float.
Leveraged finance was booming, too, with private equity firms eyeing cheap debt as they chased opportunities in South Korea, Taiwan, India and especially Australia. Corporate dealmakers soon caught on, and by the end of the year Tata Steel was locked...
Tata Steel’s acquisition of European steel maker Corus was a defining moment for the Asian syndicated loan market. The massive US$13bn term loan proved that Asian borrowers could access enormous amounts of money without the US market, raising the bar for outbound M&A. But it wasn’t supposed to be that way. When Tata Steel began pursuing Corus in late 2006, ABN AMRO, Credit Suisse and Deutsche Bank put together a leveraged financing that was to be split between senior debt and a subordinated, high-yield piece destined for the bond market. A...
Trouble brewing in the US subprime mortgage market proved to be of little consequence in Asia, where analysts were more focused on booming Chinese stocks. Shanghai soared 240% in the 12 months to October 2007, taking Hong Kong with it into bubble territory and unleashing a wave of A-share listings as overseas Chinese companies raced back home.
While the global debt markets were beginning to show signs of stress, Asia’s banks were still looking for the next big leveraged buyout, piling money into deals for the likes of Yellow Pages New Zealand...
India’s JM Financial ended its nine-year joint venture with Morgan Stanley in 2007, dissolving the last of the JVs with the bulge-bracket investment banks and ushering in a new chapter for the local market. Started in 1973, JM Financial was already a prominent player in the local investment banking world when it teamed up with Morgan Stanley in 1999. India’s securities industry, however, was in its infancy: the Sensex was at 4,000 – compared to 31,000 today – and the first IPO to be priced through bookbuilding only came in 1999, in the shape of...
Asia’s response to the global financial crisis was largely one of bewilderment. Asian banks, at least since the region’s financial crisis, were conservative, largely state-run institutions funded by a massive deposit base. The world of prop trading and subprime mortgage-backed synthetic debt was quite literally thousands of miles away.
But the sense of denial that kept markets pumping in the first half of the year – and even brought Korea Development Bank close to rescuing Lehman Brothers – eventually turned to dismay as the extent of the...
Farhan Faruqui remembers the weekend of the Citigroup bailout well. He was late for dinner. It was 7.30pm on November 21 2008, a Friday, and Faruqui was in his office when the phone rang. It was his wife, wanting to know where he was, as they had friends due to arrive for dinner any minute. “I didn’t want to leave the office,” said Faruqui, who was running Citigroup’s corporate and commercial bank for Asia Pacific at the time. “There were a few of us there and we were all in the same position. I remember looking back as I was leaving. We just...
Japan’s track record of successful partnerships between domestic and international financial institutions is not a long one. Merrill Lynch’s takeover of the stricken Yamaichi Securities in 1998 failed to give the US bank a firm footing in the country’s retail banking business. Citigroup also had a stop-start relationship with Nikko Cordial Securities, before it was forced to sell in 2009. So when Mitsubishi UFJ Financial Group wrote a US$9bn check to rescue Morgan Stanley and announced a “strategic alliance” at the height of the global...
While the crisis was still making waves at the beginning of the year – Bank of America’s rescue of Merrill Lynch very nearly collapsed in January – Asia’s capital markets were soon back to doing what they do best: raising money. Global investors turned to block trades to monetise their Chinese bank stakes, and Australia’s lenders were on a recapitalisation binge, helped by a government debt guarantee.
Regional players also sensed an opportunity to profit from the trouble in the west. Giant deals for Petronas and Maxis underlined Malaysia’s...
Australia’s famously sedate bond arena may be short on hair-raising moments, but the country’s banking sector was certainly not immune from the global financial crisis. As financial scribes and analysts looked around for the next national basket case to follow the housing and banking collapses in the US, UK, Ireland and across Europe, Australia came into their sights – an obvious target given the country’s commodity-heavy economy and shallow bond market that forces its biggest lenders offshore for up two two-thirds of their annual wholesale...
If 2009 was a year of recovery, 2010 in Asia was all about growth. Capital markets records fell from South Korea to India as companies and governments rode the wave of enthusiasm for emerging markets, and local currency bonds blossomed as quantitative easing weighed on the US dollar.
China’s overseas march, however, would prove the most significant, as Agricultural Bank of China’s giant IPO and the first Dim Sum bonds confirmed the enormous depth of international demand for the country and its currency. Asian investors also proved they could...
Share sales from the Indian government have long paid a standard fee of Rs1, but it wasn’t always that way. In 2010 when the government invited bids for the Coal India IPO it said the fees had to be quoted in multiples of Rs1 and not as a percentage of the transaction. The market was inactive post the global financial crisis and few were surprised when the Rs1 figure became the final price for a Rs155bn (US$3.5bn) IPO – the largest public listing in Indian history. Without a floor price, it could have been even lower. Twenty years ago the...
With Europe held back by a worsening sovereign debt crisis, the rise of the Asian consumer was the theme behind many of the most popular deals of 2011. Global issuers, from Italian fashion house Prada to US luggage maker Samsonite, turned to Hong Kong – rather than New York or London – to list shares closer to their key growth markets, reflecting the growing clout of both Asian investors and Asian consumers.
Bond markets had a rocky ride, and it was the Dim Sum arena that hosted Asia’s first offering of Basel III-compliant bank capital....
The Chinese renminbi was one of the world’s most sought-after currencies throughout 2011, and its growing use outside of mainland China spawned big opportunities in the bond markets. Multinationals including BP, Volkswagen and Unilever all launched debut Dim Sum bonds during the year, after global fast food chain McDonald’s opened the market in August 2010. “Dim Sum was on the agenda of pretty much every Fortune 500 company very quickly,” said Stephen Williams, head of global banking for South-East Asia at HSBC, who was previously head of...
The breakthrough growth of Asia’s debt capital markets was the highlight of a challenging year, with uncertainty in the eurozone still weighing heavily on risk appetite. Asian issuers broke the US$100bn mark in G3 bond sales for the first time, and also reduced their reliance on the 144A or global markets as local investors welcomed a range of products from perpetuals to securitisations.
Equity markets diverted their attention to South-East Asia, where the listings of Felda Global Ventures and IHH Healthcare made Malaysia an unlikely hub of...
Corporate bond sales in Singapore dollars peaked at S$32.8bn in 2012, according to Monetary Authority of Singapore data, a far cry from the S$3.9bn market size in 1998. As with so many of Asia’s local currency markets, the roots of that growth lie in the wake of the financial crisis, when the MAS moved to allow high-quality foreign issuers in an effort to broaden the market. A year later, a rating requirement was dropped, and volumes grew. It was not until the aftermath of the global crisis 10 years later, however, that Singapore morphed into...
The very suggestion that the US might scale back its monetary stimulus sent several Asian currencies into a nosedive over the summer of 2013, adding to a bleak picture in a market already worried about cooler Chinese growth.
Despite the headwinds, financing markets continued to innovate. India’s government listed its first exchange traded fund, CNOOC priced China’s first big euro bond, and Asia’s first Green bond arrived from South Korea’s export-import bank. The trend of Chinese companies delisting from the US also reached new heights, and...
Offshore rupee financings are well known around the world as Masala bonds, but it was very nearly something different. International Finance Corp opened the offshore rupee market in November 2013, introducing what would become a new funding source for corporate India three years down the line. The name for the new instrument, however, proved a challenge. IFC received a petition from more than 2000 citizens, demanding offshore rupee bonds to be named “Yoga bonds”, according to Jingdong Hua, vice president and treasurer of IFC. “We were very...
Asian issuers and investors took on new significance in the global capital markets in 2014, making it clear that the region is no longer dependent on western money. Alibaba’s world-record IPO, followed up with a jumbo bond, proved that Asia’s homegrown champions can stand shoulder to shoulder with the world’s biggest and best-known companies. Bank of China showcased the firepower of Asian investors with its world-record bank capital offering.
International bond sales soared another 30% to more than US$200bn from Asia, excluding Japan and...
A high-profile German carmaker might not seem the obvious candidate for a test of China’s cross-border financing framework, but it was Daimler’s Rmb500m (US$73m) Panda bond in March 2014 that set the prototype for this promising market. As the first foreign corporation to sell renminbi bonds onshore, Daimler’s modest one-year deal, priced to yield 5.2%, was a key moment in the opening up of China’s domestic market. Liu Shiyu, then deputy governor of the PBoC, now the chairman of the CBRC, applauded the deal at a ceremony before the bookbuilding...
One of the most intriguing bond issues in Asia is one that still has not seen the light of day. Papua New Guinea has been considering a US dollar offering for longer than IFR Asia has been in print, but the sovereign debut looks no closer to happening today than it did back then. The Pacific nation was on the road again in 2016, but its winding path to the bond market began in the late 1990s, when it hired JP Morgan and Warburg Dillon Read to work on its debut. At that point, it was an ongoing dispute with a group of mercenaries that put paid...
Global markets were repeatedly caught looking in the wrong direction throughout 2016, whether it was Britain’s referendum on Europe, negative rates in Japan, the rise of Donald Trump, or the cancellation of almost 90% of India’s banknotes.
Asia, however, could largely afford to ignore external shocks. Chinese outflows dominated every asset class as mainland buyers looked for an alternative to a declining renminbi and overseas acquisitions hit a record. Singapore managed to contain the fallout from a series of defaults, and even South Korea’s...
Volatility was the one constant of 2015, affecting everything from Chinese equities to US Treasuries, from South-East Asian currencies to global commodity prices. After a 12-month bull run, the wheels fell off the A-share bandwagon in June, and underwriters had to cope with massive syndicates on the deals that did come to market. A rout in oil prices resumed in the second half of the year, contributing to a miserable year for South-East Asia.
There were some bright spots, however. Equity underwriters made money in India, global corporate issuers...
Bank of China’s US$6.5bn offering of Additional Tier 1 capital in November 2014 remains the largest international bond from a Chinese borrower. China’s internationalisation has transformed Asia’s debt markets in recent years, with countless jumbo financings from mainland issuers and a steady flow of Chinese money heading offshore. Bank of China’s AT1 was far from the first big deal from the country, but it marked a turning point in the scale of what was possible. When Chinese regulators set the agenda for Basel III-compliant issuance, there...