Bankers expect market to be quiet ahead as most deals for 2012 done

Hong Kong banks' syndicated loan volume fell 41 percent in the third quarter, down from the second quarter of this year, as large corporations shunned the local loan market, opting instead for bond financings and bilateral loans, according to Thomson Reuters data.

Local syndicated bank loan volume in the third quarter amounted to $10.5 billion, representing a slump of 41 percent from the $17.7 billion in the second quarter. Volume in the first nine months of 2012 totaled $32.4 billion, shedding 25 percent compared to the $43.4 billion recorded a year ago.

If not for a busy second quarter as a result of a few large refinancing and acquisition deals that boosted the city's volume, this year would have mirrored the quiet market seen in 2008 and 2009 during the global financial crisis.

Going forward, bankers expected the rest of the year to be subdued as many companies have already refinanced maturing loans via bonds or bilateral deals.

"As the international credit rating agencies stopped downgrading Asian companies further, these companies in the Asia Pacific region, including Hong Kong, can opt to issue bonds to enjoy cheaper funding cost compared to bank loans," said local treasury market analyst Wilson Chan.

"More international institutional investors are turning to investing in Asia Pacific bonds for stable returns ensuring that new bond issuances will be well received," Chan said, adding that "the retrenchment of various European and US investment banks in the Hong Kong syndicated loan market also trimmed the local syndicated market loan volume."

"Amid a low-interest rate environment, corporations in the Asia Pacific can enjoy a lower bond issuance cost prompting more of such bond issuance activities," Credit Agricole Fixed Income Senior Strategist Frances Cheung told China Daily.

Meanwhile, Hong Kong-listed mainland firms and some top-tier Hong Kong names have been going to Taiwan to raise funds, contributing to a loss of deal flows in the Hong Kong market. Cathay Pacific Airways, for example, obtained an upsized $260 million five-year bullet loan from Taiwan in May, while China Resources (Holdings) sealed a $200 million three-year deal in September that targeted only Taiwanese lenders.

According to Dealogic, Asia Pacific (ex Japan) syndicated loan volume reached $223.5 billion in the first nine months of 2012, down 36 percent from the $350.7 billion recorded in the same period last year.

In the third quarter this year, syndicated loans totaled $52.2 billion in the Asia Pacific, down 57 percent on the $121.1 billion in the third quarter of 2011 that represented the lowest quarterly volume since the first quarter of 2009 ($47.1 billion).

Reuters contributed to this story

oswald@chinadailyhk.com

(HK Edition 09/29/2012 page2)