Due to Chinese debt agreements and the fact that U.S. interest rate reduction makes it more cost-effective for businesses to issue dollar bonds rather than local currency debt, Asian dollar bond issuance is predicted to increase by around 20% in 2025 compared to the previous year.
According to LSEG statistics and term sheets examined by Reuters, dollar bonds totaling at least $6 billion were issued in the first few days of 2025. The Export-Import Bank of Korea and the aluminum manufacturer China Hongqiao Group (1378.HK) have set the prices for the deals.
Without accounting for Japan or Australia, we anticipate a 20% growth in dollar bonds issued in Asia to reach between $220 and $225 billion by 2025,” said Rishi Jalan of Citigroup (C.N.). Stated the chairman of the Asia Pacific debt syndicate. In 2024, approximately $175 billion in dollar bonds were issued.
Many guns will need to fire to meet that volume to get to that level,” he stated.
A significant amount of volume has been lost in India to local currencies, which will need to be converted back into dollars. As a result, we will need to see some of the significant Chinese IT companies regain their prominence and rise in issuance in India.
Increased dollar issuance encourages big investment banks to act as book-runners on the deals to raise their fees while helping finance the expansion goals of Asia-based businesses.
For the last two years, rising U.S. interest rates have made it more affordable for several Asian businesses to issue bonds in their own currencies or rely on local bank funding instead of issuing dollar bonds.
However, the Fed lowered the policy rate by a full percentage point at its final three 2024 sessions. In its upcoming meeting on January 28–29, it is anticipated to maintain the rate in the current range of 4.25% to 4.5%.
According to Jalan, the rise in dollar debt issuance this year is expected to be driven by China’s technological giants. Before this, late last year, the e-commerce companies Alibaba and Meituan (3690.HK) raised $7.5 billion through dollar bonds.
Last year, the two digital behemoths gathered funds to settle debt and get funds for expansion. In 2025, bankers anticipate that tendency to continue.
DRIVING FORCE:
According to Dealogic statistics, China, a major contributor to the expansion of the dollar debt market in Asia, issued $77.1 billion in dollar bonds in 2024, an 81% increase over the $42.5 billion raised the previous year.
The statistics indicated that despite the significant increase, the amount was still far behind the $210.5 billion raised in 2019.
According to Avinash Thakur, head of capital markets finance, Asia Pacific at Barclays, high-quality Chinese firms may issue today and are more at ease with the rates than in 2023 and the first part of 2024.
According to him, there will be issuance in the IT industry and the industrial sector, where they have finance requirements.
According to bankers, the nation’s struggling real estate market, which was a significant junk bond issuer before a debt crisis that struck the industry in 2021, is unlikely to make a comeback to the markets anytime soon.
According to Thakur, the industry is still facing pressure, property values are continuously down, and debt levels are high.
South Korean dollar bond issuance increased 14.5% in 2024 to around $50 billion in other parts of the region. Still, investors may steer clear of deals in that market due to political unrest, according to Jini Lee, a partner at the law firm Ashurst.
According to Lee, investors who wanted to diversify their assets outside of the United States and wanted to invest in Asia could have turned to Korea and India. He also said that other Asian markets have become more popular with investors outside the area due to pessimism toward China.
The market could be quiet before that since some investors might decide to hold off on investing in South Korean firms until the political situation has stabilized.
