Emerging Markets: debt issuance slows ahead of year-end; China dominates hefty 2021 tally

By Rebecca Melvin

Concord, N.H., Dec. 17 – While additional new issues in emerging markets debt might trickle in over the next two weeks, the tally for 2021 is essentially complete and the result is certainly robust. Year-to-date emerging markets issuance stands at $828.03 billion in 1,491 deals, compared to $729.73 billion in 1,270 deals for the same period of 2020, according to Prospect News’ data.

The 13.5% spike in emerging markets issuance compares to a similar rise in U.S. high-yield issuance for 2021. But U.S. investment-grade issuance was lower in 2021 than it was in 2020.

As usual, China was a heavyweight issuer in Asia and the world. It accounted for $279.66 billion of debt in 612 deals, representing 33.78% of total emerging markets issuance in 2021. Other Asian issuers also tipped the scale dramatically. On its own, Hong Kong brought $49.695 billion in 130 deals representing 6% of overall issuance. It was followed closely by Korea, which accounted for $47.125 billion of issuance in 124 deals, or a 5.69% share of total volume.

Indonesia was another issuance leader, bringing $19.621 billion in 32 deals for a 2.37% share of the tally. It was followed closely by India with $17.884 billion in 32 deals for a 2.16% share.

Away from Asia, Mexico was a sizable market participant. The country had $30.157 billion in 36 deals, or 3.64% of the total. It was followed closely by Chile with $27.678 billion in 36 deals for a 3.34% share of the total market, and Brazil was next with $25.363 billion in 34 deals and a 3.06% share.

The Gulf Cooperation Council countries were fairly active with United Arab Emirates accounting for $23.06 billion in 30 deals and a 2.78% share of the market, followed by Saudi Arabia with $18.584 billion in 11 deals and a 2.24% share of the market.

Many forecasters are predicting emerging markets issuance will be flat to lower for 2022 following a strong 2021. BofA Securities’ Global Research puts the 2022 figure close to that of 2021 for corporate issuance and 2% lower for sovereign issuers. Emerging markets sovereigns will issue $179 billion gross and $112 billion net in 2022, compared to $183 billion gross in 2021, BofA predicts. In addition, the bank’s U.S. high-yield and U.S. investment-grade strategists are forecasting lower supply next year, which is supportive of emerging markets.

With a 2% decline in emerging markets sovereign issuance but a lift in corporate to $679 billion, BofA’s estimate for 2022 is close to its 2021 forecast.

“We expect strong support from crossover investors into EM debt due to a shortage of U.S. and European bonds in the corporate markets. Specifically, issuance in U.S. investment grade corporates and U.S. high yield are expected to drop 7% and 15% to $1.3 trillion to $1.4 trillion for U.S. [investment grade] and $425 billion for U.S. high yield,” according to BofA’s Global Emerging Markets 2022 outlook report entitled Peak pessimism pending, published on Nov. 21.

After two issuers from Mexico brought sizable deals to market last week, the country was silent this past week. Benchmark-sized deals, or those that are $500 million or more, were hard to come by this past week. China’s Xihui Haiwai I Investment Holdings Co., Ltd. priced $300 million of 1.95% green notes due 2024 on Wednesday. The notes (expected rating: //BBB+) are guaranteed by Wuxi Construction and Development Investment Co., Ltd.

The Regulation S paper has a make-whole call and are putable upon a change of control at 101.

Proceeds will be used for refinancing the group’s debt in line with its green finance framework.

The infrastructure construction services company is based in Wuxi, China.

India’s Greenko Power II Ltd. sold $1 billion of 4.3% senior notes due 2028 (//BB) that settled on Dec. 13. But that put pricing of the bonds in the previous week and thus not a real component to this past week’s primary market. Nevertheless, the bonds, from one of India’s leading renewable energy companies Greenko Energy Holdings, represent a notable issue, the proceeds of which are earmarked to refinance the operating subsidiaries’ project-level debt, according to Fitch Ratings.

© 2015 Prospect News.
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