- Strong momentum in the bond market continued in 2014 as shown in the half-year performance in SGX’s new bond listings. From Jan-Jun 2014, 259 new bonds were listed, up 16% compared to same period last year. S$112.3 billion was raised in 1H14, up 8% compared to the same period last year.
- Of the bonds listed on SGX in June, 53% are rated and 47% are unrated. Bond issuers may use credit enhancement features to improve the bond’s credit rating or may issue unrated bonds even if the issuers have credit ratings.
- Robust investor appetites for Thai bond issues and China’s Hainan Airlines returned to Singapore’s RMB-bond market in June with a re-tap of a previous transaction completed in May.
45 new bonds were listed on SGX in June 2014, bringing the half-year total to 259 listed bonds with S$112.3 billion raised. In comparison with 223 bonds listed (S$103.8 billion raised) in 2013, which saw record number of bonds listed on SGX, 2014 seems poised for another record stellar performance in the bond market.
Highlights
Unrated bonds
In general, bonds may be rated or unrated and whether a bond receives credit rating or not from a credit rating agency is largely dependent on the issuer’s discretion. Some factors involved in an issuer’s consideration for a credit rating include, but are not limited to, costs, target investor base, market practices, regulations, and even simply the issuer’s preference. An unrated bond, therefore, does not equate to being risky. A company with credit rating may also issue and list bonds that are unrated. For example, United Overseas Bank Limited, which has credit ratings of Aa1/AA- by the rating agencies, issued US$100 million of short-dated unrated floating rate note maturing in June 2015.
A bond investor needs to assess the fundamental creditworthiness of the issuer and structure of the bond based on available information. Reviewing the bond structure is important because an issuer can also use credit enhancement features to boost the credit ratings of its bonds. Some companies or institutions may choose to structure their bonds using credit guarantees from banks if a higher credit rating enables them to achieve objectives such as access to a wider investor base or the reduction in cost of funding. For example, in June, MCC Holding HK Corp Ltd issued and listed a 3-year US$500 million credit enhanced bond with a bank-backed standby letter of credit, which was rated investment-grade.
On SGX, 47% of the bonds listed in June are unrated. Issuers from Australia, China, Japan, Philippines and Singapore have issued unrated bonds in various currencies - Singapore and US dollars, Yen and Renminbi.
Thai Bonds
Robust investor appetites for Thai bonds were evident in the successful transaction by Thai oil and gas producer PTT Exploration and Production with a bond issue of US$1 billion 4.875% subordinated perpetual capital securities, which listed on SGX on 23 June. Krung Thai Bank Public Company Ltd. also successfully sold Thailand’s first Basel III-compliant bond in a US$700M 5.2% Tier II 2024 transaction, which listed on SGX on 27 June.
Hainan Airlines
Hainan Airlines returned to Singapore’s RMB bond market in June. The Chinese carrier had recently in May became the first corporate bond issuer to issue and clear its RMB-denominated bond in Singapore via SGX with its 1.7 billion RMB 6.25% bond maturing in 2017. Last month, it re-tapped the market with another 1.3 billion RMB issue, which reinforced growing investor demand in the offshore RMB market in Asia.
SGX Fixed Income
SGX's fixed income market is organised into two main segments: the retail bond market and the wholesale bond market. SGX-listed retail bonds are offered to the public and traded on the exchange's Mainboard in much the same way stocks are. SGX-listed wholesale bonds are only distributed to institutional or accredited investors in larger denominations and are primarily traded over-the-counter. More information on SGX-listed debt securities can be found here.
Debt Securities (with ≥ US$750 million issue size) listed on SGX in June 2014:
No. |
Issuer |
Amount Issued |
Description |
Listing Date |
1 |
PT PERTAMINA (PERSERO) |
USD 1,500,000,000 |
6.45% Senior Notes due 2044 |
2-Jun-14 |
2 |
Baidu, Inc. |
USD 1,000,000,000 |
2.75% Notes due 2019 |
10-Jun-14 |
3 |
The Republic Of Korea |
EUR 750,000,000 |
2.125% Notes due 2024 |
11-Jun-14 |
4 |
The Republic Of Korea |
USD 1,000,000,000 |
4.125% Notes due 2044 |
11-Jun-14 |
5 |
Yamada Denki Co., Ltd. |
JPY 100,000,000,000 |
Zero Coupon Convertible Bonds due 2019 |
13-Jun-14 |
6 |
Oversea-Chinese Banking Corporation Limited |
USD 1,000,000,000 |
4.25% Subordinated Notes due 2024 |
20-Jun-14 |
7 |
PTT Exploration And Production Public Company Limited |
USD 1,000,000,000 |
Subordinated Perpetual Capital Securities |
23-Jun-14 |