The Asia-Pacific offshore project bond market is expected to maintain substantial growth over the next few years due to the infrastructure needs of the region, which is also supporting an increase in funding diversity, Moody's said in a new report.
Project bonds in the region reached an estimated $13 billion in 2019, up by more than 3x from 2016, when Australian projects dominated the market, according to Moody's. The pool of projects has since widened to include those from Indonesia, India and Vietnam.
"A rise in both geographic and sector diversity of issuers, coupled with efforts by regional multilateral development banks and policy makers to catalyze capital market funding, will help spur growth in the project bond sector," Ray Tay, senior vice president at Moody's, said in the report published Sept. 30.
Tay said an over-subscription of recently issued project bonds shows that they appeal to institutional investors since these debt instruments allow diversification of portfolio and facilitation of duration matching.
Moody's said 78% of the region's project bonds portfolio are rated Baa3 or stronger.
