Issuance of equity-linked bonds from real estate companies in Asia has been strong for the past couple of years and has shown a marked increase in 2007. To date, there have been eight deals from real estate companies in Asia in 2007, with Hong Kong and Singapore issuance dominating. "A quarter of issuance this year has been from real estate companies, compared to 11% of the outstanding market," says Haidje Rustau, who is responsible for Asian convertibles research at Barclays Capital.
The reason for the growth of issuance is simply that the real estate sector is growing rapidly in the region. "Much of the focus is on assets in China," says Achintya Mangla, head of equity-linked origination for Asia at JPMorgan in Hong Kong. "In many cases, companies have exhausted their bank lines and at the same time the banking system has improved to such an extent that the equity-linked market has become available to them."
While many companies in Europe have been prompted to use the equity-linked market by the increased volatility of their shares – and therefore the greater optionality a convertible offers – Asian issuers tend to be more focused on the level of their share price, according to Rustau.