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Best Emerging Markets Debt House: HSBC |
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Also nominated: Citi and Deutsche Bank |
The battle for global supremacy in emerging markets debt now appears to be between Citi and HSBC.
Citi has jumped ahead of Deutsche Bank in the global rankings, but HSBC is number one in the league tables – and its lead over Citi was especially wide in the most challenging part of the awards period, at the end of last year.
Furthermore, HSBC boasts an excellent balance between issuance in G3 and in local currency – the latter being one of the year’s defining themes.
Citi and, indeed, JPMorgan are more natural US dollar debt houses, and that continues to put them in a good position in emerging market debt. In 2012, the proportion of emerging market issuance in dollars has grown at the expense of euro issuance.
Yet HSBC’s involvement in so many of the period’s most high-profile dollar-denominated transactions also illustrates the breadth of its platform.
Take the debut $3 billion triple-tranche deal for Chinese petrochemicals group Sinopec – one of the largest dollar bonds for a borrower from the Chinese mainland. Other examples of HSBC’s deals in the dollar market include a $5 billion triple-tranche deal for the Qatari sovereign, and a $1 billion 10-year deal for Eike Batista’s OGX oil company in Brazil.
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“HSBC has very effectively leveraged its global platform and the pools of liquidity it is able to bring to the table for borrowers from all regions”
Bryan Pascoe, global head of debt capital markets, HSBC |
In local currency, HSBC’s lead is even wider. It managed local-currency deals from Indonesia and Saudi Arabia to Mexico and beyond. Moreover, in emerging markets, the boundaries are breaking down between the local and international currencies, and between the local and international capital markets.
Proliferating issuers of offshore renminbi – known as dim sum bonds – added flavour to the encouraging overall growth of emerging market debt issuance in the first part of 2012, even as the latter part of 2011 disappointed along with global markets.
HSBC played a central role in the burgeoning offshore renminbi market, with deals for firms including Carlos Slim’s América Móvil in Mexico and Emirates NBD, the biggest bank in Dubai.
“If a big corporate in Latin America asks for a solution, we don’t just come up with a choice, for example, between a 10- and 30-year dollar deal,” says Bryan Pascoe, global head of debt capital markets at HSBC. “We might offer dollar, sterling, euro, Canadian dollars, Asian currency, or perhaps an Islamic structure – it’s a much broader proposition.”
HSBC has done well in opening new avenues for clients to diversify their investor base in new markets and increase exposure to more exotic currencies. Aside from offshore renminbi deals, other examples include bringing Caracas-based development bank CAF to the Hong Kong dollar market, Korean export credit agency Korea Eximbank to the Thai baht market, and Panama-based supranational lender Bladex to the Mexican peso market – all for the first time.
In addition, HSBC managed the first offshore Australian dollar bonds in Latin America for Mexican oil firm Pemex and in Hong Kong for mortgage firm HKMC. It managed rare sterling issuance, too, from Brazil for the national oil firm Petrobras and from Mexico for América Móvil.
“HSBC has very effectively leveraged its global platform and the pools of liquidity it is able to bring to the table for borrowers from all regions,” says Pascoe.
Pascoe highlights linking Asia and Latin America above all – tapping the Asian private-banking market, for example, in non-core perpetual deals in the dollar market for Banco do Brasil and Brazil-based conglomerate Odebrecht.
These deals, meanwhile, illustrate HSBC’s involvement in some of the more innovative transactions. The Banco do Brasil deal, for instance, was the first tier 1 transaction from Latin America designed to be compliant with Basle III.
HSBC can boast complexity, as well as volume and breadth. It conducted liability management exercises for the governments of Colombia, the Philippines and Uruguay, and for corporates including CAF and Indonesian telecoms firm Indosat. It also led the first inflation-linked bonds in Hong Kong and Thailand. The Thai deal was a first in south-east Asia.
Finally, HSBC has led the upsurge in Islamic issuance in 2012, partly thanks to its dominance in the Gulf. Saudi deal flow reached record levels in the first quarter of 2012 as banks and government agencies deployed extra liquidity resulting from oil prices and higher government spending.
Yet the boom in Saudi issuance was also thanks to the successful placement of a SR15 billion ($4 billion) sukuk for the Saudi General Authority of Civil Aviation in late January. The deal was the first government-guaranteed sukuk from the kingdom, setting an important new benchmark. HSBC was sole bookrunner.
