When one fundraising route closes, another one opens – at least, if you have a good bank behind you.
Politics, regulators and credit concerns all closed funding avenues for Asian companies at some point in 2021, so issuers and arrangers had to be flexible and quick to adapt.
After a booming first half of China-to-US listings, China’s regulatory crackdown on industries like the technology sector, coupled with increased scrutiny from the US authorities, ended that route to market.
Some forward-thinking Chinese companies and their advisers had already arranged listings in the mainland or Hong Kong, giving them continued access to capital if they are forced to delist from the US, but others stayed on the sidelines as they waited for new regulations to be implemented.
That created a golden opportunity for banks that could pivot resources to India, where a bulging pipeline of tech companies drew global investor attention.
South-East Asia, too, was the source of some record deals, as markets like Indonesia showed that there was no need to venture to the US to obtain a juicy valuation.
China stoked plenty of uncertainty in the bond market, too. China Huarong Asset Management unnerved holders of its investment-grade paper by missing a March deadline to file its annual report while it worked on a “relevant transaction”. After four anxious months, that turned out to be a rescue by a consortium of blue-chip investors, rather than the debt restructuring investors had feared.
The shockwaves through Chinese investment-grade credit had barely subsided by the time China Evergrande Group roiled the high-yield market with a missed coupon payment in September.
As a result, Asia’s bond market was an unusually treacherous place to navigate last year, and banks saw the benefits of a diversified client base. Indian credits saw hot demand, helped by reduced Chinese issuance, while spreads for top-tier Korean issuers tightened from a flight to safety.
Meanwhile, loan supply shrank as the bond market, onshore or offshore, continued to offer companies better terms.
Event-driven financings like leveraged buyouts provided opportunities to bold lenders that were able to move quickly, especially in Australia, while activity in places like Vietnam made up for the absence of some traditional borrowers elsewhere.
Planning the year ahead in Asian capital markets seems like a futile task, given how global events can disrupt the best-laid plans. China is finalising new regulations for the tech industry, and if it finds some common ground with the US it could trigger a flood of issuance.
Still, the banks that were successful in 2021 know the value of planning for every eventuality by building up coverage abilities across the region.
Banks needed to be prepared for the worst last year, but in 2022 they need to be ready to seize unexpected opportunities.
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