IDBI Bank, acting through its Dubai International Financial Centre branch, on Tuesday evening closed the first Singapore dollar benchmark for an Indian bank. IDBI has tapped various currencies — including the offshore renminbi and Swiss franc bond market — but this is the first time it is issuing in Singapore dollars.
Since the global financial crisis of 2008, borrowers have been looking for alternative pools of liquidity to diversify their funding base. More recently, however, investors have turned to Asia’s local currency markets, including the Singapore dollar bond market, for diversification.
“We have seen renewed interest from investors in Asian local currency bonds over the last couple of months, with much larger institutional inflows into the region,” said Rajeev De Mello, head of Asia fixed income at Schroders. “More investors are moving into the local currency market as they are keen to diversify their investments out of the US and Europe. That is a change in theme compared to last year.”
The Singapore dollar bond market has proven to be a surprisingly abundant source of liquidity — with recent bond deals from NTUC Income and Mapletree Commercial Trust attracting S$9 billion and S$4 billion worth of demand respectively last week. India’s IDBI was no different, attracting more than S$3 billion of demand for its S$250 million bond.
The initial price guidance for IDBI’s three-year bond was in the 4% area and this was revised to 3.65% to 3.75%, with the bond pricing at the tight end. There is a put at par if the government of India’s holding falls below 51%. According to a source, IDBI is expected to swap the proceeds to US dollars.
The deal was heavily driven by private banks, which were allocated 65%. Asset managers were allocated 17% and banks 18%. Singapore investors were allocated 78% and other investors took the rest. According to a source, IDBI is expected to swap the proceeds to US dollars. DBS, HSBC and Standard Chartered were joint bookrunners.
Prior to IDBI, ICICI Bank had issued a small bond privately but IDBI is the first of a benchmark size and some say that the response to its issue could encourage other Indian banks to follow. “There is a lot of liquidity in the Singapore dollar market,” said James Fielder, head of local currency syndicate at HSBC. “Investors have money and need to put it to work. We expect that there could be more Indian banks looking to tap the Singapore dollar bond market after IDBI Bank.”
Last night, another Indian lender, Axis Bank, closed a $250 million tap of its $500 million notes due 2017. The initial guidance was in the area of Treasuries plus 405bp. This was revised to a final guidance of Treasuries plus 390bp to 395bp and the bonds priced at the tight end, after attracting $1.9 billion worth of orders from 134 accounts. Asset managers were allocated 52%, banks 20%, insurers 14%, private banks 9% and public investors 5%. Asian investors were allocated 72% and European investors 28%.
Elsewhere, Guangzhou R&F has mandated Citi and Standard Chartered as joint global coordinators and bookrunners for its tap of its outstanding 2016s. UBS is also a bookrunner on the deal. The company held roadshows in Hong Kong on Monday and Singapore on Tuesday. China Shanshui Cement is holding non-deal roadshows.