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Opinion

Asia’s local-currency boom is a Chinese story

International banks might not get the rich pickings they crave in the People’s Republic.

Amid all the news last year of markets being shut, of dwindling issuance and of debt bankers being sacked as business dried up, there was one positive story for those paying attention to Asia: the remarkable rise of the region’s local-currency bond markets.

Companies in Asia have been issuing increasing amounts of debt in their domestic currencies for some years but 2008 will be remembered (among other things) as the year when Asia substantively turned away from the G3 markets and looked inwards for money. While capital-raising in the G3 currencies shrank, funding in other currencies in Asia rose from an equivalent of $148 billion to $276 billion. As dollar investors in particular nursed their wounds, investors across Asia turned their eyes inwards to the companies they knew best and bought their debt in their own currencies.

Much of this story was driven by the second remarkable trend in the year’s debt markets: the increasing volume of issuance from Chinese companies in renminbi, a steady trickle that many of the region’s bankers believe heralds the downpour to come when China’s regulators open the markets. To put the figures for local-currency growth above in context, without renminbi issuance Asia’s local-currency debt volume rose from $112 billion to $158 billion.

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