Tycoons look to CBs as shares peak

Asia’s controlling shareholders tend to like to sell shares at high prices, so the strong return of the convertible bond market this year could be another sign of an approaching market peak.

CB issuance in Asia ex-Japan (and excluding A-shares) during 2014 could come close to the record high of 2010 if the market follows last year’s trend of a busy final four months. Volumes are up more than 50% so far this year, with issuers in the region raising $10 billion year-to-date, according to Dealogic.

If the remainder of the year is as busy as the tail end of 2013, the CB market will surpass the $17 billion raised during 2010.

Equity-linked bankers remain optimistic that this will happen thanks to market conditions that they say are extremely conducive to issuance from Asian names.

"The overarching trend is that you had three years of very limited issuance,” said Nathan McMurtray, head of Asia equity-linked origination at Deutsche Bank in Hong Kong. “Conditions became acute at the beginning of this year and we saw issuers getting better terms than ever. There has also been a broadening of the issuer base as investors started to get more comfortable with high-yield names.”

That much was evident in January, when Biostime International, a Chinese milk powder company, made its post-IPO capital markets debut with a $322 million zero-coupon convertible bond.