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Yet another gold rush

A handful of high-yield bond deals from Chinese issuers in the past six months seems to presage vast hitherto untapped issuance. But although investment banks are keen to tap demand, insiders warn that real Chinese exposure remains scarce and that risks are high.

The elements are all there to spark
another investment banking gold rush.

IT IS NO SURPRISE that Morgan Stanley's debt capital markets bankers in China are confident. They struck gold in the second half of 2004 when they brought the first three China high-yield issues to market: Sino-Forest Corporation, Panva Gas Holdings and Asia Aluminum Holdings. These deals were greeted enthusiastically by investors and more of the same could prove to be a gold mine with one of the most lucrative fee veins for years. So far, the bank's good run shows little sign of abating. "We're hoping to bring a couple of deals to the market in the first half, while the year's pipeline is growing steadily." says Sheldon Trainor, managing director and head of Morgan Stanley's general industries group. "Each deal is in the $200 million to $500 million range."

They are not alone: all of the major investment banks in Asia report that they are busy pitching high-yield issues to clients and China clearly offers one of the most lucrative prospecting grounds. The elements are all there in the People's Republic to spark another investment banking gold rush.

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