Record year for emerging corporate bonds
The past 24 hours have brought news of more fund launches targeting emerging corporate debt; Barings and HSBC have started a fund each while ING Investment Management said its fund launched late last year had crossed $100 million. We have written about the seemingly insatiable demand for corporate emerging bonds in recent months, with the asset class last month surpassing the $1 trillion mark. Data from Thomson Reuters shows today that a record $263 billion worth of EM corporate debt has already been underwritten this year by banks, more than a fifth higher than was issued in the same 2011 period (see graphic):
The biggest surge has come from Latin America, the data shows, with Brazilian companies accounting for one-fifth of the issuance. A $7 billion bond from Brazil’s state oil firm Petrobras was the second biggest global emerging market bond ever.
The top 10 EM corporate bonds of the year: Petrobras issued the two biggest bonds of $7 billion and $3 billion, followed by Venezuela’s PDVSA and Indonesia’s Petramina. Brazil’s Santander Leasing was in fifth place, Mexican firms PEMEX and America Movil were sixth and seventh. Chilean miner CODELCO, Brazil’s Banco do Brasil and Russia’s Sberbank also entered the list.
The hunger for yield is trumping any concerns about the companies themselves or even broader emerging market risks. So far investors have not been disappointed; emerging corporate debt on JP Morgan’s benchmark CEMBI index have delivered dollar-based returns of around 15 percent this year, easily outstripping the 10 percent gains on global corporate debt.