Private bankers say they are avoiding Singapore’s riskiest bonds as a slowing economy worsens corporate finances and shrinking issuance makes refinancing harder.
Non-bank corporate bond offerings fell 38% to $1.63 billion last quarter from the preceding three months, the slowest start to a year since 2013, data compiled by Bloomberg show. Credit Suisse Private Banking Asia Pacific and CA Indosuez Wealth Management say investors are favoring higher-quality issuers, while UBS AG Wealth Management warns of the prospect of exchange-rate losses on local-currency bonds.
Monetary Authority of Singapore’s data show private banks bought 44% of local-currency bonds sold in 2014, making them the largest investor group as default risks mount amid a cooling economy and a commodity slump that’s pummelling the oil, shipping and rig-building industries. Singapore-listed firms have net debt equivalent to 10 times their operating profit, compared with just 0.4 times in 2011. Investors are pricing in losses of 85 cents on the dollar in notes sold by PT Trikomsel Oke and Pacific Andes Resources Development after their defaults.
“There have been a couple of defaults and a sharp sell-off in some of the weaker credit quality issuers, especially those related to the oil sector,” said Neel Gopalakrishnan, emerging-market bond analyst in Singapore at Credit Suisse Private Banking Asia Pacific. “There are concerns whether some of these companies might have liquidity issues in the next two to three years. In such a situation, it’s unlikely that investors would actually want to put new money to work.”
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Non-bank corporate bond offerings fell 38% to $1.63 billion last quarter from the preceding three months, the slowest start to a year since 2013, data compiled by Bloomberg show. Credit Suisse Private Banking Asia Pacific and CA Indosuez Wealth Management say investors are favoring higher-quality issuers, while UBS AG Wealth Management warns of the prospect of exchange-rate losses on local-currency bonds.
Monetary Authority of Singapore’s data show private banks bought 44% of local-currency bonds sold in 2014, making them the largest investor group as default risks mount amid a cooling economy and a commodity slump that’s pummelling the oil, shipping and rig-building industries. Singapore-listed firms have net debt equivalent to 10 times their operating profit, compared with just 0.4 times in 2011. Investors are pricing in losses of 85 cents on the dollar in notes sold by PT Trikomsel Oke and Pacific Andes Resources Development after their defaults.
“There have been a couple of defaults and a sharp sell-off in some of the weaker credit quality issuers, especially those related to the oil sector,” said Neel Gopalakrishnan, emerging-market bond analyst in Singapore at Credit Suisse Private Banking Asia Pacific. “There are concerns whether some of these companies might have liquidity issues in the next two to three years. In such a situation, it’s unlikely that investors would actually want to put new money to work.”
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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