Taiwan: the promised land for Asian DCM?

Taiwan has long been the bedrock of regional issuance in the international equity markets, but the vibrancy of its domestic debt markets has proved a continual constraint to international debt issuance in any size or regularity. However, mass upheaval in the domestic banking sector, now starting to undergo rapid government-enforced consolidation, may be the catalyst that encourages domestic issuers to look to overseas funding for almost the first time. Alongside a significant uptick in M&A activity and the establishment of Asset Management Companies (AMC), all banks are paying much closer attention to their Capital Adequacy Ratios (CAR) and Return on Equity (ROE).

Sector specialists say that just under a dozen banks are considering issuing bank capital transactions, with one to two offerings expected within the next six months. Many also believe that, whereas the relaxation of tier 2 capital requirements in Thailand last August proved to be a false dawn for international issuance, conditions propelling Taiwanese issuers are very different. So too, few doubt that the reception from international investors would be anything other than extremely strong, given the potential dream team of high rating and high yield.