The volume may be similar, but the names are changing. That’s likely to be the story of emerging market soveriegn debt in 2013, according to a report from Barclays, as lots of first time issuers look to tap the markets.
And rather than big benchmark issuers such as Turkey, South Africa and Russia driving the supply of hard-currency bonds, the biggest issuer next year may well be Indonesia.
The country may issue around $5-6bn gross in straight bonds and sukuk, according to Barclays. “Given that Indonesia has at least $1bn due every year from 2014-22, we believe the government is likely to consider a liability management exercise (buyback or exchange offer) to term out upcoming redemptions.”
On a net basis, including interest, Jakarta tops the list with nearly $4bn in the sovereign pipeline.
Indonesia aside, the big drivers of EM debt will be in central and eastern Europe, where countries, including Hungary, Latvia, Romania and Ukraine, have repayments to the IMF and other institutions coming up, particularly near the start of 2013. In contrast, several Latin American issuers may be net payers in 2013, with Barlcays expecting Brazil (-$2.7bn), Colombia (-$1.5bn) and Venezuela (-$2.0bn, including state-owned oil giant PDVSA) to all pay down foreign debts, partly funded by local currency bonds.
Elsewhere in Asia, Barclays believes that the high grade sovereigns of South Korea, Thailand, India and Malaysia are likely to tap the market, as well as Vietnam – if the country makes progress in restructuring banks and state-owned enterprises. However, the Philippines may end up with a net reduction in eurobond issuance if the country continues to shift its external debt into local or onshore paper by issuing global peso notes and onshore dollar-denominated bonds.
So with the larger nations making less of a debt splash, investors’ interest may be piqued by some maiden country bonds. Barclays point to Mongolia, Kenya, Nigeria, Angola, Tunisia, Dominican Republic, Costa Rica, Honduras and Paraguay as possible first-time issuers, following some of the recent debut deals: “The appetite for diversification and hunt for yield have allowed the universe of EM issuers to continue to expand, with some sub-Saharan African (Zambia, Angola) or LatAm (Bolivia, Guatemala, Costa Rica) issuers joining the ranks of EM credit index names.”
Mongolia, for instance, is a potential maiden issuer, according to Barclays, as the government is looking to raise around $1-2bn for infrastructure projects and create a benchmark for its banks.
Overall, Barclays expects the gross level of EM sovereign hard-currency debt issuance in 2013 to be around $77bn, slightly down than the expected $85bn in 2012. After a dip in debt issuance volume in 2011, 2012 is set to be a record year, driven by “highly accommodative global monetary and liquidity conditions, continued drive for diversification and, generally speaking, more solid debt dynamics in EM than in most of the developed world”.
Asian bond markets are coming of age, FT
EM bonds: watch out for 2014, beyondbrics
Government bonds: On the hunt for yield in more robust emerging markets, FT
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