Zorilla calls Citi conference the Godzilla of Asian investor gatherings

As Citi's largest regional client event gets under way in Singapore today, we speak with the bank's regional head of markets, Rodrigo Zorilla, to discuss what trends and themes are on the agenda at the Asia-Pacific Investor Conference, which has attracted more than 1,000 issuers and investors from across the globe.
 
What are some of the key market trends in 2011?
While 2010 was a record year for the issuance of Asian debt both locally and internationally, [we are currently seeing] the busiest ever start to a year for Asia-Pacific and Asia ex-Japan G3 bond issuance, with close to $40 billion issued in the region so far this year, up 25% from last year's record.
 
Issuers took advantage of favourable market conditions in the last quarter of 2010 and this momentum has carried into 2011. But markets remain volatile and our advice to clients is to look to tap the market soon, before rates and/or spreads drift higher. Some issuers who locked in 30-year money in recent weeks, such as CNOOC, Sinochem and Reliance Industries are starting to look very savvy. (Citi was joint books on all.)
 
Key macro themes this year will be domestic demand sustaining Asia's outperformance, inflation will prompt further tightening and property curbs, and FX appreciation will be resisted via further intervention and capital controls.
 
What is becoming increasingly clear though, is that while Asia and the US economies have not decoupled, the decoupling of Asia's capital markets is already well underway. Since the start of our investor conference some eight years ago, Asian offshore bond issuance has doubled to more than $100 billion and Asian local bond issuance is now in excess of $100 billion -- pre crisis it was virtually non-existent.
 
Asia's share of global bond issuance is at an all time high. The same is true of the equities markets -- Hong Kong is now the world's largest IPO market and Asia had record years for issuance in 2010 across all the major asset classes. M&A activity from Asia also hit a new record.
 
Asian corporates, many of which are with us this week, with visionary leaders and entrepreneurial mindsets along with ready access to financing, are increasingly looking outside the region for acquisitions. This is the age of the Asian corporate champion and you will see more financings from Asia linked to episodic M&A in the year ahead.
 
Do these conferences really generate any new business for you?
This is the eighth year Citi is hosting the Asia-Pacific Investor Conference and it is now recognised as a leading capital markets investor conference for issuers and investors in the region. It is the Godzilla of Asia-Pacific investor conferences.
 
It provides an opportune chance to hear from some of the world's leading investors and issuers alongside some of our global and regional colleagues on key trends and outlooks for markets and issuance... In the past few years the conference has generated several mandates from debt issuers and also resulted in increased flows through the various client desks.
 
Fair enough, so back to trends...What has been driving the outflow of funds in recent weeks?
Rising inflationary pressure led by food prices has been the dominant theme in Asia with China hiking its one-year lending rate by 25bp last week. Concerns about policy tightening and slowing growth has also driven fund flows out of emerging markets to developed markets, especially with the US economy continuing to see improving consumer and job data trends.
 
Last week, emerging market bond funds recorded a total outflow of $477 million, with more selling pressure in hard currency funds, according to our emerging market strategy group. While this trend may still persist in the near-term, we don't see it as a structural challenge to Asian outperformance in the medium-term, since economic growth is still strong and developed markets still have a long way to recover. This may drive a high degree of volatility in Asian credit. However, we still expect credit fund flows into Asia to support the technical picture.
 
You are back in Singapore for the event for the first time since 2008. Has Singapore cracked it as a major financial centre?
During the past 40 years, Singapore has developed into a thriving financial centre, serving its domestic economy, Asia-Pacific and the world. Financial institutions in Singapore trade round-the-clock with Asia-Pacific centres, as well as with Europe and the US, making Singapore a significant hub for 24-hour trading of FX and securities.
 
Singapore is now the fourth largest FX centre globally, and the second in Asia (after Tokyo) with average daily FX turnover volume of $266 billion. [Source: BIS data as of April 2010, up from $242 billion in April 2007].
 
Singapore Exchange's market cap has jumped 25% from a year ago to S$900 billion ($702 billion) and the bourse welcomed close to 40 new IPOs in 2010, raising more than $11 billion, including several high-profile transactions such as those for Tiger Airways and Global Logistics Properties, which Citi advised on.
 
And then, keep in mind that Singapore has also developed into the largest Reit [real estate investment trust] market in Asia, with a combined market cap of S$38 billion. The country is also a leading energy trading hub in Asia, and increasingly, for other commodities as well.
 
You sound like a poster boy for invest in Singapore! Let me turn your attention back to your firm. What will drive growth at Citi in the markets business this year?
We are major liquidity providers to clients across equities, bonds and FX in Asia-Pacific and my job is to make sure the team continues to be in the heart of the flows, such as Asia into Latin America, or Europe into Asia. We have big franchises in all these regions so I spend a lot of time working with global colleagues on how we can make sure these clients are using our platform.
 
We've had excellent momentum in our underwriting business in late 2010 and early 2011, having led key deals such as the Philippines' global peso bond, a synthetic renminbi bond for Evergrande and a new dollar corporate benchmark for CNOOC. It's important to be at the heart of primary flows if you want to be taken seriously as a flow house too.
 
We've also scaled up our local markets FX platform by moving key talent from our London and New York offices to Singapore as FX strategists to drive the development of Asian FX and local markets strategy products to our clients. In investor sales, we've made several key hires across multiple markets. We will continue to hire to add to our team, which now is at more than 1,500 in the 18 markets in which we operate in Asia-Pacific.