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Euromoney, March 2017

At what point does a boom become a bubble? The question needs to be asked in Asian high yield, where year-to-date issuance volumes are fast approaching the figure for the whole of 2016 in China and have already long exceeded it in India and Indonesia – after just eight weeks of the year, one of which was a write-off for Chinese New Year.

By February 15, Asian issuers had raised more than $6.6 billion in high-yield bonds, since when further issues have come from Xinyuan Real Estate, Qinghai Investment, Huawei (unrated), Future Land, Road King, Grand China Air (unrated) and the Mongolian sovereign.

International bankers are loving it. You can see relief in their eyes. Shoved indignantly down the league tables by mainland Chinese houses and their Hong Kong subsidiaries in recent years as China’s issuers have focused domestically, the return of high yield – in significant style, and with greater diversity than in years – has brought fees and activity to a previously tight-margin market. All of them talk of considerable pipelines across multiple locations.

But… at what stage do we become alarmed? For some in the market it has already happened. If you had to pick a moment, it would probably have been when Indonesian coal industry supplier Bukit Makmur Mandiri Utama (Buma) attracted a $2.2 billion book for a $350 million bond paying 7.75% for five year non-call three money on a deal whose coupon tightened by more than half a percentage point along the way – despite the fact that more than half of Buma’s revenues come from Berau Coal, which defaulted on its own bonds in 2015.

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Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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