Best emerging markets debt house: HSBC
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Over the past year, primary market conditions for emerging market borrowers have been remarkably stable, despite commodity-linked corporate bond defaults from Latin America to eastern Europe, the market shutdown in Brazil and Russia, and FX volatility.
What’s more, the default from Chinese property developer Kaisa early this year only temporarily dampened appetite for Chinese real-estate paper, representing some 40% of Asian high-yield issuance. Corporate ambitions and deal volumes in international debt markets, however, remained high despite these pressure points and market hysteria over emerging-market leverage. Records have been broken across geographies and sectors on pricing, tenor, deal structures and FX formats.
The key primary market issuance themes in EM over the past year include euro issuance for non-European names, the globalization of Chinese debt, leverage-driven M&A, the growth of Basel-III bank capital, corporate hybrids, sukuk and perpetual debt, as well as the challenges of navigating FX and commodity-price volatility.
On all fronts, HSBC excelled.
While some rival bankers attempt to downplay the strength of HSBC’s DCM franchise, claiming it leads with balance-sheet facilities rather than market-leading ideas, the past year highlighted the level of trust invested in the bank from key clients.
Over the last four consecutive years, HSBC has grabbed 10.5% market share, just under a percentage point more than Citi. Like Citi, the breadth of HSBC’s DCM capabilities is staggering from high yield to market-leading debuts and vanilla Eurobonds. But, over the awards period, it secured top spot by market share for an international bank in Asia ex-Japan in G3 format, boasting market-leading bank capital and corporate hybrid deals. It is also the lead arranger in the cost-efficient euro market, bringing new pools of liquidity for the likes of Sinopec and Hutchinson Whampoa in Asia, the United Mexican States, and Kazakh agribusiness KazAgro. What’s more, it has driven the globalization of Chinese debt, leading 64 offshore RMB bonds with a market share of 15.8%, seven out of eight of Greater China G3 corporate hybrids and nine out of 12 bank capital deals in the Greater China region.
In the growing Asian high-yield market, it brought 22 debut names to the market.
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Our global proposition is incredibly well connected, which enables us to originate bespoke cross-border solutions and share innovative technology effectively across all the EM regions Jean-Marc Mercier |
It is also number two in Latin America – arranging the first-ever euro century bond for a sovereign with Mexico’s €1.5 billion 100-year – and leads the MENA league tables by number and volume of deals, particularly in the project-finance space. Over the awards period, HSBC was the top arranger of global EM bond deals, according to Dealogic, with 520 transactions and a 4.86% market share, closely followed by Citi with a 4.47% market-share.
Key deals include Sinopec’s multi-tranche €1.5 billion deal, Poland’s SFr580 million ($623 million) zero-coupon, three-year deal (the first-ever negative yield for a non-Swiss issuer), Banco do Brasil’s $2.5 billion AT1 deal (the first Basel III-compliant issue in Brazil) and Tata Steel’s $1.5 billion paper (the largest Asian corporate high-yield debut).
Jean-Marc Mercier, global co-head of debt capital markets at HSBC in London, sums up the EM fixed-income powerhouse’s achievements. “Our global proposition is incredibly well connected, which enables us to originate bespoke cross-border solutions and share innovative technology effectively across all the EM regions. This was demonstrated, for example, by the inaugural UK and Hong Kong sukuks, the first ever offshore RMB green bond we brought for IFC [the private sector arm of the World Bank] and the one-day switch liability-management technique created for sovereigns in Latin America and now used across geographies.”
Alexi Chan, global co-head of debt capital markets at HSBC in Hong Kong, adds: “We have a unique debt platform, trusted by EM borrowers around the world to deliver equally strongly across dollars and euros, while also providing access to an unrivalled array of local currency markets. We really outperformed across each of the key EM regions – CEEMEA, Latin America and Asia Pacific. Our global connectivity and reach enabled us consistently to stay one step ahead of the competition. Renminbi internationalization remains a key theme. We extended our leadership in offshore RMB bonds, bringing innovative structures and connecting issuers to new pools of RMB liquidity around the world.”
HSBC’s debt-capital markets franchise – which was incorporated into the capital-financing group in August 2013, along with the primary markets business of equity and M&A – benefits from relative stability compared with many of its rivals. Long-standing bankers such as Katia Bouazza, head of Latin America, and Adil Kurt-Elli, head of CEE and sub-Saharan Africa DCM, are leaders in their industries and trusted by strategically important clients.
In the current climate, fewer investment banks have cross-border inventory capacity, the ability to warehouse securities, or provide capital-intensive swaps and local-currency financings at competitive rates. As a result, universal banks such HSBC and Citi are well placed to grab more share in strategically important markets if European wholesale banks retrench further.
