Coronavirus concerns fuel rush to raise corporate debt
(18 February 2020 – Asia) As global investors increasingly seek haven assets, Asian corporates in particular are taking advantage of low yields to raise currency debt.
In the Asia Pacific, corporates are seizing on low yields to raise hard currency debt at a record rate.
According to the latest Dealogic data, Asian corporates (ex-Japan) have raised $37.5 billion of debt denominated in USD, EUR and JPY. The previous high was $27.3 billion raised in 2017. The shift is occurring as global investors poured a record amount into bond funds. According to analyst figures, fixed income mutual funds and exchange traded funds took in $23.6 billion, the biggest weekly intake since 2001 with inflows into US bond funds accounting for two thirds of the total.
Moody’s released a research note confirming the coronavirus outbreak has diminished optimism about prospects of an incipient stabilisation of global growth this year. It said it had revised global GDP growth forecast down, expecting G20 economies to collectively grow 2.4 percent in 2020, notably down from 2020 before improving to 2.8 percent in 2021. Container shipping from Chinese ports has collapsed since the outbreak of coronavirus and has yet to show any sign of recovery, threatening weeks of chaos for manufacturing supply lines and the structure of global trade. Almost half of planned container journeys on the route from Asia to Europe have been cancelled this month. Routes from the Pacific to the US and Latin America have also frozen to a standstill.
“We have reduced our growth forecast for China to 5.2 percent in 2020 reflecting a severe but short-lived economic impact and maintain our expectation of 5.7 percent growth in 2021. Lower Chinese import demand is the primary reason for slowing growth. We have also lowered our real GDP growth forecast for Australia (Aaa stable), Korea (Aa2 stable) and Japan (A1 stable) on account of the coronavirus as intra-regional trade amplifies the impact of lower Chinese growth. Growth is set to slow across the Asia Pacific as coronavirus weakens demand and disrupts supply chains. Additionally, we have reduced our growth projections for India (Baa2 negative), Mexico (A3 negative) and South Africa (Baa3 negative), a reflection of domestic challenges in those countries rather than external factors” Moody’s stated in the note.
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