McCarthy bullish on second half debt issuance

Bank of America''s President for Asia outlines why he remains optimistic despite rising interest rates.

The Asian debt markets will continue be robust in the second half, predicts Colm McCarthy, Bank of America's president in Asia. McCarthy estimates there will be $20 billion of debt issuance in the second half.

"It's been a busy first half and it looks like that will continue," says McCarthy. "The pipeline is strong and with interest rates turning, that could mean that some issuers may try to launch their bonds sooner rather than later."

He adds that he is optimistic on the region's prospects.

"I am optimistic. Japan has found a way forward. China is dominating the regional economy and becoming the number one pan-Asian economic driver. Korea and Taiwan are still doing quite well. And while India is doing extremely well, Australia just keeps on humming along. The fear of recession and depression is not around anymore. The robustness of economies in the region means a small rise in interest rates is not a problem."

McCarthy has been busily building BoA's Asian debt business for the past 24 months. He says the firm did a review of its debt franchise and decided to get more focused.

"What we had was a strong client franchise. Over the past 50 years many of our Asian clients had grown into multinationals. We had sophisticated debt businesses and technology in the US and Europe and it was just a question of connecting that with the more sophisticated Asian markets. We then picked out the cross-border debt products we would focus on market by market."

"In Australia we focused on the US dollar private placement market [where Australian borrowers issue in US dollars and swap it back to Australian dollar]. In Korea, thanks to bank consolidation and the need to revamp their balance sheets we focused on taking Korean banks to the European market. In India we decided to become more strongly involved in local currency syndications."

On the product side he notes, "We were big in the CDO product in the US but just hadn't brought it here."

This year BoA has completed high profile CDOs for Bank of East Asia ($1.5 billion) and UOB ($1 billion).

BoA also has the mandate for the forthcoming LG Caltex bond issue. McCarthy says that apart from league table deals the firm has been involved a large number of client-driven private placements that come in under the radar screen.

McCarthy has built a new team at BoA. In May, he appointed John Liles as head of Debt Capital Raising for Asia, and Alvin Chua as head of institutional sales. Edwin Png was named head of debt markets for Japan and Greater China and Scott Jung for Korea and South Asia.

In July, the team was further expanded with the hire of Swaroop Patel, a veteran of JPMorgan and ABN AMRO. He takes up the role of co-head of fixed income origination, and as well as looking after G3 origination will develop a local currency platform for BoA in Hong Kong.

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