Change is afoot in Asia’s capital markets. This year’s Review comes after the best year on record for Asian bonds, but one of the toughest ever for primary equities, turning the region’s established investment banking model on its head.
While many readers will doubtless be relieved to see the end of 2012, the region’s debt specialists are looking forward to a well-earned break. The breakthrough growth of Asia’s debt capital markets has been one of the highlights during a challenging year, but it is just one of a number of themes that have emerged over the past 12 months and are now challenging banks and clients to rethink their traditional playbooks.
Unable to compete with cheap bonds, Asia’s international lenders have relied on a rebound in acquisition financings to boost their budgets, paving the way for an M&A boom as underwritten financings become more readily available. South-East Asia has attracted a greater share of attention than it has for years, forcing firms to reshuffle resources. Block trades and follow-on offerings now account for almost 75% of the ECM pie, raising the stakes for underwriters.
With the corrections in Europe and the US still ongoing, and with China’s economy coming off the boil, these are not likely to be temporary phenomena.
However, while analysts debate when US rates will rebound, and whether or not Asian companies will keep up their record pace of bond sales in 2013 and beyond, investment bank chiefs face tougher challenges ahead.
The arrival of tougher banking regulation and capital rules, against a backdrop of slower global growth and continued uncertainty in the eurozone, has left investment banks at a crossroads – in Asia and beyond. The way they go from here will determine which institutions emerge as sustainable businesses, and which fall by the wayside.
These pages aim to honour the deals and institutions that stood out during the year. They also intend to show just what can be accomplished against a tough backdrop.
In this period of upheaval, many different directions are possible. Some difficult decisions have already been made, and recognition must go to the institutions that have dared to rethink their approaches, rather than persisting with flawed business models in the hope that others will drop out first.
Even in the beaten-down equity capital markets in Hong Kong and China, companies like Alibaba, Hong Kong Exchanges & Clearing and Swire Pacific proved they could still access the capital needed to meet their objectives, and the resulting block trades, convertible bonds, loans and private placements all feature among this year’s list of winners.
These, and many more fine examples of creative thinking, reveal that there are still plenty of opportunities in Asia –no matter what the market conditions may be. They also confirm that Asia’s investment banks are doing what they do best, bringing capital investment to where it is needed. That is a worthy message for the end of any year.
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