A surge in the issuance of local currency-denominated securities pushed Asia-Pacific banks' debt issuance volumes up more than 18% year over year in August.
The region's banks raised $18.25 billion in debt in August versus $15.46 billion a year ago, according to data S&P Global Market Intelligence compiled on a best-effort basis. The August aggregate, however, was down from the month before, when banks' issuance volumes jumped more than 60%.
Banks raised $9.98 billion in local currency-denominated securities in August — more than 50% of the aggregate — as mainland Chinese and Indian banks moved to issue securities in local currencies to meet their funding needs. Mainland Chinese banks and their units in Hong Kong issued $5.42 billion worth of Chinese yuan-denominated bonds, while Indian banks raised $2.78 billion in rupee-denominated securities, the data showed.
China Minsheng Banking Corp. Ltd.'s $4.18 billion yuan-denominated offering was the largest local-currency transaction in August, with Industrial and Commercial Bank of China Ltd.'s $1.13 billion offering the second biggest. State Bank of India's $894.2 million debt issuance rounded out the top three.
Banks' debt volumes in August mirrored a broader trend seen across the Asia-Pacific. The region's issuers have preferred borrowing in local currency markets even as offshore issuance begins to recover, S&P Global Ratings said in a Sept. 25 report. Local currency bond issuance through August remained at a record high, while offshore bond issuance volumes over the same period were the second lowest since 2016, behind 2023's record-low, Ratings said.
Similarly, local currency bond issuance in emerging East Asia in the second quarter grew 15.4% over the previous quarter, Asian Development Bank said in its Asia Bond Monitor, dated September 2024.
Overall, financing conditions were easing as the US Fed begins cutting rates and as global markets expect a soft landing for the US economy, Ratings said.
US dollar bonds
Asia-Pacific banks issued $5.28 billion worth of greenback-denominated worth of debt securities — or nearly 29% of the total — in August, the Market Intelligence data showed. Asian Development Bank's $3.50 billion bond offering was the largest such offering, followed by Nanyang Commercial Bank Ltd.'s $700 million issuance.
While the US Fed has started cutting rates, analysts said issuance volumes of dollar-denominated bonds from mainland Chinese and Japanese will depend on the maturity schedule of their outstanding debt and capital requirements.
"Japanese banks' debt issuance volumes are mainly driven by the maturity schedule of outstanding debt and aimed at maintaining a certain buffer of Tier 2 capital on top of Tier 1 capital," said Michael Makdad, senior equity analyst for Morningstar. "That is to say: the level of U.S. dollar interest rates, whether expensive or cheap, doesn't have much effect on issuance volumes by Japanese banks."
The same is true for mainland Chinese banks, according to Iris Tan, senior equity analyst for Morningstar.
"I think Chinese banks are also in similar situation with Japanese banks in terms of US dollar denominated debt issuance," Tan said. "The decisions depend on capital requirement and maturity schedule."
Lone equity issuance
Auswide Bank Ltd.'s approximately $8.1 million institutional placement was the only equity transaction completed by an Asia-Pacific lender in August, Market Intelligence data showed.
The Australian bank raised the funds at A$4 per share. It said it would use the proceeds to fund its immediate regulatory common equity Tier 1 capital requirements upon the acquisition of Specialist Equipment Leasing Finance Company Pty. Ltd. and transaction costs relating to the acquisition, among other things.