Foreword

As 2019 draws to a close, the year will surely be remembered as the moment when Asia’s capital markets reached a new stage of maturity.

With tensions between the US and China simmering in the background throughout the year, Asian companies were still able to access capital when needed, and capital allocation became much more efficient. The uncertain backdrop made investors selective, and even the underdeveloped Chinese credit market showed signs of differentiating between good prospects and bad.

In the equity markets, follow-on offerings and corporate restructurings kept underwriters busy, even as the flow of jumbo IPOs from Chinese unicorns dried up. Bigger convertible bond volumes were also a sign of growing sophistication on both the buyside and sellside, with US-style structured equity techniques becoming commonplace on Asian offerings.

China took perhaps its biggest step yet towards creating a globally competitive stock market with the introduction of the new technology-focused board in Shanghai. The Star market, with relaxed listing rules and a streamlined approval process, opens the A-share market to hundreds of new-economy companies for the first time. Price discovery still needs some work, but the board has already lured several overseas-incorporated Chinese companies back home, and more are sure to follow.

China also opened its stock market to greater international participation in 2019, with a new trading link with London and a higher weighting in MSCI’s equity indices.

Asia’s bond markets took huge strides forward, too. New issues grew longer and larger as global investors widened the hunt for yield, allowing companies from India to Vietnam to access international capital for the first time.

High-yield issuance broke the annual record midway through the year; investors warmed to Asian infrastructure assets; green and sustainable financing finally entered the mainstream. In India, the offshore bond market finally emerged as a real alternative to the constrained local market.

Signs of maturity were evident across the region, from record corporate capital raisings in Thailand to the growth of a local currency bond market in the Philippines.

It is ironic, then, that the one place where maturity was lacking in 2019 is the US, where anti-China sentiment has prompted some alarming calls for restrictions on access to the world’s biggest capital market. An outright ban on Chinese IPOs seems far-fetched, but US politicians are already disrupting global capital flows, and further surprises cannot be ruled out – especially with a presidential election looming in 2020.