Opportunistic capital raising and hungry investors about the region drove Singapore corporate debt issuance at a record pace in the first half of 2012 despite a slight slowdown in the second quarter.
But while market insiders report robust pipelines, the typical summer lull and uncertainties in the global economy could put a damper on the second half.
“Despite the slowdown in issuance during the second quarter of 2012, the Singapore-dollar bond market witnessed a record start raising the best semi-annual proceeds worth S$14.2 billion this year, highlighting the fact that Singapore is favoured as a stable investor haven with its Triple A rating,” Thomson Reuters senior research analyst Elaine Tan said.
Singapore-based companies raised US$4.8 billion in debt in the second quarter of 2012, a modest 7 per cent year-on-year increase, according to data compiled by Thomson Reuters.
With the help of a record-setting first quarter, year-to-date issuance volumes by Singapore companies jumped 68.2 per cent to US$14.4 billion from 57 deals, almost as much as the US$14.9 billion raised in the whole of 2011.
Total offshore bond issuance by Singapore-based companies more than doubled to US$6.8 billion from the year-ago volume.
In terms of Singapore-dollar issuance, companies raised S$6.3 billion in the second quarter of the year, up 31 per cent year-on-year but down 20 per cent quarter on quarter.
Year-to-date Sing-dollar debt issuance was an all-time high of S$14.2 billion from 61 deals, up 46 per cent from the year-ago period.
Underlying the strong issuance numbers have been the historically low interest rate levels.
The benchmark 10-year Singapore government Securities yield has fallen almost 20 basis points since the start of 2012 to about 1.44 per cent as at end-Monday.
There was a certain amount of opportunistic capital raising, as issuers who were uncertain about future market conditions sought to secure funding or to refinance older debt whenever a window opened.
“Given the low interest rate environment, issuers were keen to lock in attractive fixed rate term financing,” said Jason Khoo, head of debt capital markets, South-east Asia, for HSBC Bank, the second-most prolific bookrunner so far this year.
Investors were also eager to pick up corporate credit, and at longer tenures, given the low returns on less-risky government debt and other asset classes.
“Now what you have is a choppy equity market, you also have sentiments towards the property sector somewhat dampened with all the measures that have come out to curb it, and also it’s kind of a given now that rates will stay low for quite some time,” said Clifford Lee, head of fixed income at league table-leading DBS.