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Banking

High stakes: Why Asia’s wealthy are piling into the bond markets

As equity markets founder and Asia’s high-net-worth individuals become more sophisticated, the region’s private banking bid for bonds is driving the international debt markets. Could Asia’s rich professionals be the new Belgian dentists?

When $8 billion of a total $13 billion demand for a Chinese property-related bond issue in Asia comes from private banks, it is time to sit up and take notice.

This happened last month when Longfor Properties, a Beijing-based real estate company founded almost a decade ago, provided the clearest indication yet of just how influential and plain big the private banking bid for corporate bonds in Asia has become.

Longfor’s $400 million RegS seven-year non-call-four deal was priced with a yield of 6.875%, at the tight end of final price guidance. The size of the order book, with about 300 accounts participating, enabled the arrangers substantially to tighten the pricing.

Publicly, sources close to the deal said that a relatively healthy fifth of the demand for the offering came from private banks. In fact the fraction was far heftier – more than half – providing evidence of how private banks and their clients are turning to bond markets in numbers that were unthinkable not so long ago. Historically, institutional fund managers have been by far the largest buyers of corporate bond deals in Asia.

The Asian private banking bid for bonds is not limited to Hong Kong and Singapore names that have long been their domain.

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