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Capital controls signal caution as Asia bonds boom

In September and October a torrent of tightly priced Asian bond deals pushed established investors along the yield curve and swept in new names. The more exotic the deal, the more investors flocked to it. But there are concerns that too much money is flowing into Asia. Lawrence White reports.

THURSDAY, SEPTEMBER 30 was as busy a day as Stephen ­Williams, head of debt capital markets Asia at HSBC, can recall in his career in the region’s bond markets. That day his bank was involved in four bond deals that demonstrated in their variety and the keenness with which investors received them the breadth of the emerging markets credit frenzy that has developed in the past few months. "Markets are on fire," says another debt banker, "and I can’t see that changing before the end of the year."

The four deals HSBC sold on September 30 included a rare 15-year bond for Hongkong Land, an unusual short-dated $175 million note for Hong Kong bank Dah Sing, a $4.46 billion debt swap and new issue to follow for the Republic of the Philippines, and a $500 million bond for Hyundai Motors. The day before, HSBC had joined Bank of America Merrill Lynch and RBS in extending Sri Lanka’s sovereign yield curve with a $1 billion 10-year bond that generated $6.5 billion in orders.

What connected all these deals was the enthusiasm shown by investors, despite the relatively low returns on offer once they all tightened.

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