Appetite for equity-linked debt is strong amid global volatility, even with aggressive terms, analysts say
Issuance of equity-linked debt, including convertible bonds, could hit a record high in Asia-Pacific this year, driven by Chinese firms seeking lower-cost funding and investors betting on market gains amid global volatility, according to bankers.
So far this year, investors have shown a strong appetite for US$10 billion in convertible and exchangeable bond offerings by issuers from mainland China and Hong Kong, including Baidu, Ping An Insurance (Group) and Chow Tai Fook Jewellery Group – even when the deals carried aggressive terms.
They accounted for a big chunk of the US$13 billion total issuance volume in Asia-Pacific excluding Japan and mainland China onshore shares, according to data compiled by Dealogic. The total is on track to exceed last year’s record of US$25.7 billion.
“Convertible bonds are an instrument that resonates with many institutional investors in the current market,” said Brian Chau, co-head of equity-linked deals for Asia at UBS. “They offer downside protection while providing equity upside, which is particularly appealing given the macro volatility.”
