Fixed-income research poll results 2011

Our 2011 fixed-income research poll results analyse monetary policy and the market outlook, and identify the region's best borrowers, analysts, rating agencies and research houses.

Once again, Singapore stands out as the country perceived to have had the most stable monetary policy during the past year, according to our survey of 1,090 investors. Hong Kong, which is forever in competition with Singapore, didn’t even garner half the number of votes. Interestingly, China came in third, indicating a level of comfort with the managed currency.

Like last year, credit default swap (CDS) spreads are viewed as the number one indicator of default, according to those polled. While rating agency research does not top the list as an indicator, perhaps a sign that investors are regaining faith in the agencies is that the percentage who thought it was an indicator increased to 5.9%, up from just 4.1% last year.

And indeed, investors are pleased with the level of high-quality research about the contagion effects of the European and US sovereign debt crises and the possible impact of a double-dip global recession. Sadly, this was a topic we polled last year as well. We all look forward to not having to write about this in the future.

But the doom and gloom topic is here to stay for awhile, for although last year more than half of the respondents thought that distressed debt workouts were likely to decrease in Asia during the next 12 months, this year, more than half take the view that they are likely to increase in Asia during the next 12 months.

Given the European debt crisis, the sluggish economy in the US and a general lack of political leadership in the West to fix problems, it’s perhaps not surprising that Asian investors are a touch more wary this year than last. Only 44.1% of our respondents expected more international bond issuance this year, as compared with 2010, and 41.2% either don’t expect an increase or simply don’t know.

While last year 70.2% of the respondents said they would increase their exposure to fixed income in general, this year only 53.5% hold that view. And only 38.3% expect they will increase their exposure to Asian high-yield next year, as opposed to the 52.4% who held that view last year. This may not just be because of the global economic climate, but also could be down to China. A whopping 65.2% of respondents say that the disclosure and auditing problems alleged at some Chinese companies discredited the Chinese segment of the high-yield bond market this year.

As a result, it should come as no surprise that banks expect to decrease their staffing level in 2011. As many as 42.9% of those who answered this question held that view.

Just like last year, Indonesia remains the sovereign darling when it comes to credit ratings. In total, 273 respondents, or 41.9% of the people who answered this question, said they expected Indonesia would see a sovereign credit upgrade in 2012. Of course, 59.7% held that view last year, and 39.5% thought this way in 2009, so we have been waiting for some time.

And, just as last year, Vietnam continues to top the list of nations that investors think is due a downgrade. However, China has joined the crowd. Last year, Thailand was a concern, but with elections behind us, investors seem more confident.

China also leads the list of nations in which investors think a corporate debt default is likely — this too is the same as last year, with Vietnam again coming in second in the race no one wants to win. Indonesia was viewed as another potential home for corporate defaults last year, but investors seem more confident this year.

This year, there were far more close calls for who was the most professional borrower in each country throughout Asia.

Once again Hutchison Whampoa topped our list as the best borrower in Hong Kong, but Cheung Kong was hot on its tail. And this year, Bank of China pipped Country Garden, which was the borrower of choice from the mainland last year.

Asia's best borrowers
  China Bank of China
  Hong Kong Hutchison Whampoa
  India ICICI
  Indonesia Adaro
  Korea Kexim Bank
  Malaysia Petronas
  Philippines San Miguel
  Singapore Temasek
  Taiwan Not awarded
  Thailand PTTEP
  Vietnam Not awarded

In the Philippines, the government is the perennial winner. But, this year, San Miguel got one more vote than the sovereign to win the top position.

In Thailand, PTTEP beat PTT by just one vote; last year the results were reversed with PTT winning by such a narrow margin.

Such close calls, show solid reviews for all of those institutions. In other countries, we are seeing bigger fields of competition.

Last year, in Indonesia, Adaro edged out Indosat by one vote. This year, Adaro came out on top again, with Indosat taking second again, but also in the mix were Pertamina, Bumi Resources and Indika, indicating investors are becoming more comfortable with a broad range of Indonesian household names.

In Korea, once again the financial institutions dominated, with Kexim Bank again winning — and this year by a large margin. But Shinhan Bank, Korea Development Bank and Hyundai Capital were also in the mix.

However, there were some simple choices. In Malaysia, Petronas once again swept the votes, as did Temasek in Singapore. Early on in the India tally, it looked as if ICICI would be tied with Reliance, but in the end, ICICI had double the votes of Reliance. Still, the two were the top choices by investors for India.

There were insufficient votes this year to make a call for the best Taiwanese or Vietnamese borrowers.

Best overall
For the third year running, respondents again resoundingly chose Hutchison Whampoa as the best corporate investment-grade borrower from throughout Asia.

  Most-professional borrowers
  Investment grade Hutchison Whampoa
  Non-investment grade Country Garden
  Financial institution investment grade Kexim

This year, China’s Country Garden won the vote for best non-investment-grade corporate borrower, pipping Indonesia’s Adaro. But this is a vote that could go either way — last year, the results were flip-flopped, with Adaro winning.

On the financial institution front, Kexim clearly won, but ICICI and DBS garnered a significant number of votes as well.

Three years ago we introduced the question: Which country is the most professional sovereign borrower? Two years in a row the Philippines swept the award — by roughly four times the votes for any other country.

Not this year. While the Philippines won again this year, it was by one vote over Indonesia, which got only one more vote than Korea. This, perhaps is the best news of all, as it indicates investors view more nations as professional borrowers

Frances Cheung, Credit Agricole

This year, Credit Agricole CIB’s Frances Cheung swept the best analyst category with ease, knocking out UBS’s Edwin Chan, who has won it for the past two years. Both Cheung and Chan are frequently quoted by the financial press, so they have name recognition.

Dariusz Kowalczyk, also of Credit Agricole, and also an oft-quoted analyst by financial journalists, took third place — though this was harder to tally as his name was frequently spelled wrong.

The results for the rating agencies are once again quite similar to last year’s rankings. The majority of the respondents chose Standard & Poor’s as their agency of choice.

For example, with regard to influencing decisions on sovereign credits, this year 56.3% said S&P affected their decisions (last year 55.1% held that view, and two years ago 51% voted that way). Fitch took a slightly bigger bite out of the pie this year, with 11.2% of the votes, as compared with 7.8% last year.

When it came to banks, 51.6% of respondents said they turn to S&P (last year 49.7% chose the agency and the year before 46% selected it). Fitch’s and Moody’s popularity remained largely stable with 34.2% giving the nod to Moody’s this year (37% voted for it last year) and 14.1% going for Fitch (13.4% selected Fitch in 2010).

As for corporate credits 56% of investors chose S&P (last year 53.6% selected the agency and in 2009 51% voted for it). S&P garnered 52.5% of the votes for its calls on structured finance products, up from the 48.3% of respondents who selected S&P last year.

The international credit rating agency whose research decisions were cited as most used overall in Asia was S&P, at 54.1%, with Moody’s garnering 32.6% of the votes and Fitch racking up 13.3% of the nods.

We also asked investors if they thought the quality of the rating agencies’ Asian research had improved during the past 12 months. Only 54.8% this year held the view that the quality had stayed the same, down from 61.4% who expressed that view in 2010, while 24% of those who voted said the quality has decreased — compared to 15.9% last year. However, this might just mean that voters were pleased they weren’t facing another 2008 crisis last year — as a quarter of the voters in 2009 thought research reports were declining in quality and 38% held that view in 2008.

“I think the rating agencies really had to clean up their act after 2008,” said one investor FinanceAsia spoke to yesterday. “S&P’s decision to downgrade the US this year may have been clumsily handled, but at least it showed some balls.”

Indeed, we asked readers if they thought S&Ps downgrade on the US was merited.While 43.3% said, “yes”, 37.2% said it was merited just poorly handled. Only 19.5% thought it wasn’t merited at all.

For yesterday's results from our fixed-income poll, please go to the next page and also look out for our 2011 Bond Markets Guide, which will be published as a supplement to the upcoming November issue of FinanceAsia magazine.

Analyst ranking
      Firm Votes
  1   Frances Cheung, Credit Agricole 81
  2   Edwin Chan, UBS 61
  3   Dariusz Kowalczyk, Credit Agricole 45
  4   Pradeep Mohinani, Nomura 34
  5   Sidhartha Sanyal, Barclays Capital 33
  6   William Mak, Nomura 31
  7   Yoshio Takahashi, Barclays Capital 29
  8   Glen Ko, UBS 24
  9   Danny Suwanapruh, Standard Chartered 24
  10   Wai Ho Leong, Barclays Capital 22
Rating agency votes

This year, 1,090 people responded to our annual fixed-income poll, roughly 400 more than last year. This is good for us, in that we have a broader pool of views, which we think gives us a more accurate picture of Asia’s fixed-income markets. However, it could also indicate that the markets have slowed enough for people to have time on their hands... time to fill out a poll.

Each year, people ask where the respondents are located, keen to know how well-positioned they are to comment on markets in Asia. Most are from Hong Kong and Singapore; as well as India, Japan, and Korea. But a fair chunk of responses also came from Australia, China, the Philippines, Taiwan, the UK and the US. In short, they represent a broad range of the active participants in Asia’s fixed-income markets.

Readers might notice that the points each bank scored tally up to more than 1,090 votes for each question. This is because we asked respondents to name the top three providers of fixed income research for each of the six areas we consider: macroeconomics, Asian bank and financial sector research, investment-grade credit research, high-yield research, sovereign credit research, Asian fixed income and credit strategy. We also asked respondents to choose the best sales trading team. In most cases, respondents selected two banks per category.

For the past two years, Barclays Capital has dominated the top position and this year is no different. It stands out as the leading house in four categories: macroeconomic research, investment-grade credit research, high-yield research and credit strategy.

However, Nomura won two of the polls: Asian bank and financial sector research, and best sales trading team. The bank has been steadily climbing the ranks since it bought Lehman Brothers’ Asia team — and the results of the poll seem to indicate that not only did it woo new clients, it has retained them.

J.P. Morgan, a long-standing top-ranked bank on our poll, took third overall, but dominated the sovereign credit research category, which it also won last year.

For a more detailed look see the charts below.

Overall score
      Firm Votes
  1   Barclays Capital 1,730
  2   Nomura 1,443
  3   J.P. Morgan 1,135
  4   UBS 985
  5   HSBC 919
  6   Credit Agricole CIB 903
  7   Deutsche Bank 841
  8   Citi 800
  9   Standard Chartered 788
  10   Morgan Stanley 722
  11   Credit Suisse 567
  12   Bank of America Merrill Lynch 521
  13   Goldman Sachs 492
  14   BNP Paribas 338
  15   RBS 333
  16   ANZ 235
  17   DBS 140
  18   ING 135
  19   Societe Generale 116
  20   Mitsubishi UFJ Securities 114

      Firm Votes
  1   Barclays Capital 285
  2   Nomura 219
  3   J.P. Morgan 190
  4   HSBC 171
  5   Credit Agricole CIB 160
  6   UBS 158
  7   Deutsche Bank 147
  8   Citi 137
  9   Standard Chartered 131
  10   Morgan Stanley 112
  11   Credit Suisse 93
  12   Bank of America Merrill Lynch 85
  13   Goldman Sachs 82
  14   RBS 53
  15   BNP Paribas 51
  16   ANZ 45
  17   DBS 28
  18   Societe Generale 22
  19   ING 21
  20   Mitsubishi UFJ Securities 17

Asian bank and financial sector
      Firm Votes
  1   Nomura 260
  2   Barclays Capital 241
  3   J.P. Morgan 149
  4   Morgan Stanley 134
  5   UBS 130
  6   Credit Agricole CIB 127
  7   HSBC 121
  8   Standard Chartered 119
  9   Bank of America Merrill Lynch 101
  10   Credit Suisse 100
  11   Deutsche Bank 100
  12   Citi 97
  13   Goldman Sachs 70
  14   BNP Paribas 60
  15   RBS 53
  16   ANZ 31
  17   DBS 24
  18   ING 17
  19   Mitsubishi UFJ Securities 16
  20   Societe Generale 15

Asian investment-grade credit
      Firm Votes
  1   Barclays Capital 272
  2   Nomura 188
  3   J.P. Morgan 172
  4   UBS 148
  5   HSBC 123
  6   Standard Chartered 118
  7   Credit Agricole 108
  8   Citi 103
  9   Morgan Stanley 100
  10   Deutsche Bank 96
  11   Credit Suisse 85
  12   Goldman Sachs 65
  13   Bank of America Merrill Lynch 62
  14   BNP Paribas 42
  15   RBS 41
  16   ANZ 31
  17   DBS 15
  18   Societe Generale 14
  19   Mitsubishi UFJ Securities 13
  20   ING 11

Asian high-yield
      Firm Votes
  1   Barclays Capital 265
  2   Nomura 202
  3   UBS 147
  4   J.P. Morgan 134
  5   Deutsche Bank 121
  6   Credit Agricole 115
  7   Standard Chartered 105
  8   HSBC 102
  9   Citi 95
  10   Morgan Stanley 92
  11   Credit Suisse 84
  12   Bank of America Merrill Lynch 66
  13   Goldman Sachs 63
  14   BNP Paribas 45
  15   RBS 44
  16   ANZ 30
  17   ING 22
  18   Mitsubishi UFJ Securities 19
  19   DBS 17
  20   Societe Generale 13

Sovereign credit
      Firm Votes
  1   J.P. Morgan 193
  2   Barclays Capital 187
  3   HSBC 140
  4   Citi 138
  5   Nomura 132
  6   Credit Agricole CIB 127
  7   Deutsche Bank 121
  8   UBS 118
  9   Standard Chartered 97
  10   Morgan Stanley 93
  11   Goldman Sachs 77
  12   Credit Suisse 52
  13   Bank of America Merrill Lynch 50
  14   BNP Paribas 49
  15   RBS 41
  16   ANZ 33
  17   ING 29
  18   Societe Generale 16
  19   Mitsubishi UFJ Securities 14
  20   DBS 13

Credit strategy
      Firm Votes
  1   Barclays Capital 285
  2   Nomura 221
  3   J.P. Morgan 160
  4   UBS 143
  5   Credit Agricole 138
  6   Deutsche Bank 126
  7   HSBC 126
  8   Standard Chartered 106
  9   Morgan stanley 102
  10   Citi 90
  11   Goldman Sachs 72
  12   Bank of America Merrill Lynch 70
  13   Credit Suisse 66
  14   BNP Paribas 47
  15   RBS 46
  16   ANZ 31
  17   DBS 24
  18   Mitsubishi UFJ Securities 18
  19   ING 17
  20   Societe Generale 16

Sales trading team
      Firm Votes
  1   Nomura 221
  2   Barclays Capital 195
  3   UBS 141
  4   Citi 140
  5   J.P. Morgan 137
  6   HSBC 136
  7   Deutsche Bank 130
  8   Credit Agricole 128
  9   Standard Chartered 112
  10   Morgan Stanley 89
  11   Bank of America Merrill Lynch 87
  12   Credit Suisse 87
  13   Goldman Sachs 63
  14   RBS 55
  15   BNP Paribas 44
  16   ANZ 34
  17   Societe Generale 20
  18   DBS 19
  19   ING 18
  20   Mitsubishi UFJ Securities 17


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