Indian issuers are also in a strong position to raise capital. The US dollar market is currently unattractive to Indian companies due to high funding costs. But domestic liquidity remains strong, which means corporates can issue in Indian rupees and borrow from banks that want exposure to high-quality assets. So, despite the turmoil in global markets, Indian companies with steady cash flows still have access to capital.
Unique opportunities in China
China, which is home to world’s second largest bond market, was the subject of a discussion at the Asia Credit Conference that focused on what makes its onshore standout from other markets.
In terms of monetary policy, China is notable due to its current loose policy stance, along with stimulus measures to support the economy. This goes against the global trend of central banks tightening policy. For Chinese issuers, it reduces borrowing costs, but at the same time reduces returns for investors.
China also offers securities unavailable in other markets. Local Government Financing Vehicles (LGFVs) for example, are significant issuers of debt, and they can be considered as hybrids that are partly sovereign and partly commercial. They can however be challenging to analyse, requiring a very on-the-ground approach to research.
Trading dynamics are also unique in China’s onshore bond market, due to the dominance of commercial banks. As traders, they tend to have very similar risk appetites and tend to move in the same direction as a group. One investor on the panel described how this uniform behaviour creates buying and selling opportunities for other traders.
Opportunities from diverse markets in Asia
HSBC’s 6th Asia Credit Conference highlighted the diversity of Asia’s fixed income markets. The region contains both developed and emerging markets, issuance options in G3 and local currencies, as well as markets like China and Japan, where monetary policy remains loose. In the current challenging environment, investors and issuers can consider the opportunities presented by this diverse region to find yield and raise capital.