Growing demand for USD-denominated bonds in Asia will continue, according to a panel of experts, with the size of the total Asian bond market set to hit $US1 trillion by the end of the year.
Speaking on a panel at ANZ’s 2018 Debt Conference, Jimmy Choi, co-Head of Capital Markets at ANZ said 2017 was a banner year for interest in Asian debt markets.
The Asian USD bond market grow more than 65 per cent in 2017, according to Choi, to $US312 billion. That spend came across a total of 553 transactions, up from just over 400 the year before.
These figures represent “a phenomenal number from a flow and number of deals perspective,” he said.
“We’ve been discussing the rise of Asian liquidly over the past three or four years,” Choi said. “I think we’re at a critical juncture where we want to explore - is it a true alternative funding market for Australia?”
To Arthur Lau, Managing Director at Pinebridge Investments, the answer to Choi’s question is yes.
“The liquidity I believe will stay and continue to grow,” he said. “We can clearly see the liquidity force remains extremely strong. Asian liquidity should remain very constructive to the market.”
Rapidly built-up liquidity has left demand outstripping supply of higher-grade US bonds, with Australia and NZ seen as natural choices for Asian investors seeking access to developed markets.
Lau, also Co-Head Emerging Markets & Fixed Income at Pinebridge, said the total Asia credit market had grown from $US200 billion back in 2009 to now almost $US900 billion.
“We currently expect the Asian bond market hit the $US1 trillion mark likely by the end of this year,” he said. “At the latest, early next year.”