Turkish corporates have come late to the eurobond market, with $4.1bn in foreign currency bonds outstanding last September, up from just $400m at the end of 2012, according to the Bank for International Settlements.
Should investors be worried? After all, the surge in issuance has come during a period of turmoil for the lira and other EM currencies, and issuers risk being found guilty of original sin.
By Shamaila Khan of AllianceBernstein
Emerging market corporate debt has returned big numbers for investors in recent years, as the sector rode a general wave of optimism. But those days are gone. In 2013, successful investors have had to take a more painstaking path.
This year, investors have succeeded by making careful decisions on securities only after scrutinising balance sheets and management teams, and identifying pockets of opportunity—while avoiding defaults. Latin America showcases the point. Default rates there have been very high (see chart below) but investors who avoided the region altogether missed out on some great opportunities. The problems weren’t systemic – they were idiosyncratic.
In case you missed it, here’s a great chart from Robin Wigglesworth’s Local currency bond market given revamp story: it shows how investors are missing out on emerging market corporate local debt. Read the full story here; chart after the break.
South African corporate bond issues are still on the up after a record 2012.
Recent figures from Absa Capital, a subsidiary of Barclay’s, show the rise continuing into 2013. If issuance so far is any indication of what’s to come in the rest of the year, an increase of more than 50 per cent looks possible.
The Export-Import Bank of India has become the first Indian institution to issue bonds in Australian dollars, opening up a new market.
The bank raised $200m on Tuesday, double the amount planned, with a 5-year bond paying 5.76 per cent a year.
Just when you thought yields on Latin American corporate bonds couldn’t get any lower, along comes an issue that resets the price curve all over again.
Cielo, a Brazilian card-payment processor, on Friday launched $875m of 10-year debt at 225 basis points over US Treasuries, or roughly 3.86 per cent – the lowest price ever paid by a LatAm company selling new debt of that maturity.
When you have a corporate capital expenditure programme of $236.5bn, the world’s largest, you cannot stay out of the markets for long.
That’s why Brazil’s national oil company, Petrobras, on Monday returned with a €2bn offer of bonds maturing in 2019 and 2023 and a £450m offer due in 2029, according to IFR.