ASIA CREDIT REPORTFirst Quarter 2018
PREPARED IN PARTNERSHIP WITH

ASIFMA is an independent, regional trade association with over 100
member firms comprising a diverse range of leading financial institutions fromboth the buy and sell side including banks, asset managers, law firms andmarket infrastructure service providers. Together, we harness the sharedinterests of the financial industry to promote the development of liquid, deep
and broad capital markets in Asia. ASIFMA advocates stable, innovative andcompetitive Asian capital markets that are necessary to support the region’s
economic growth. We drive consensus, advocate solutions and effect changearound key issues through the collective strength and clarity of one industry
voice. Our many initiatives include consultations with regulators andexchanges, development of uniform industry standards, advocacy forenhanced markets through policy papers, and lowering the cost of doing
business in the region. Through the GFMA alliance with SIFMA in the US and
AFME in Europe, ASIFMA also provides insights on global best practices andstandards to benefit the region.

1. Table of Contents
1. Table of Contents ............................................................................................................................................. i
2.1. G3 ex DM Asia: Total Issuance ............................................................................................................. 3
2.2. G3 ex DM Asia: Total Outstanding ........................................................................................................ 3
2.3. G3 ex DM Asia: HG Issuance ................................................................................................................ 3
2.4. G3 ex DM Asia: HG Outstanding ........................................................................................................... 3
2.5. G3 ex DM Asia: HY Issuance ................................................................................................................ 3
2.6. G3 ex DM Asia: HY Outstanding ........................................................................................................... 3
2.7. G3 ex DM Asia: Total Issuance by Country ........................................................................................... 4
2.8. G3 ex DM Asia: Total Outstanding by Country ...................................................................................... 4
2.9. G3 ex DM Asia: Total Issuance by Sector ............................................................................................. 4
2.10. G3 ex DM Asia: Total Outstanding by Sector ...................................................................................... 4
2.11. G3 ex DM Asia: HG Issuance by Rating .............................................................................................. 4
2.12. G3 ex DM Asia: HG Outstanding by Rating ......................................................................................... 4
2.13. G3 ex DM Asia: HY Issuance by Rating .............................................................................................. 5
2.14. G3 ex DM Asia: HY Outstanding by Rating ......................................................................................... 5
2.15. G3 ex DM Asia: Total Issuance by Tenor ............................................................................................ 5
2.16. G3 ex DM Asia: Outstanding by Remaining Tenor .............................................................................. 5
2.17. Asia ex DM: Total Leveraged Loan Issuance ...................................................................................... 5
2.18. Asia ex DM: Total Leveraged Loan Issuance by Use of Proceeds ..................................................... 5

3. LCY Asia ex Developed Market Asia (Japan, Australia and New Zealand) ....................................................... 6
3.1. LCY ex DM Asia: Total Issuance ........................................................................................................... 6
3.2. LCY ex DM Asia: Total Outstanding ...................................................................................................... 6
3.3. LCY ex DM Asia: Issuance by Currency ................................................................................................ 6
3.4. LCY ex DM Asia: Issuance by Sector .................................................................................................... 6
3.5. LCY ex DM Asia: Outstanding by Country ............................................................................................. 6

4. All Asia ............................................................................................................................................................. 7
4.1. G3 All: Total Issuance ............................................................................................................................ 8
4.2. G3 All: Total Outstanding ....................................................................................................................... 8
4.3. G3 All: HG Issuance ............................................................................................................................... 84.4. G3 All: HG Outstanding.......................................................................................................................... 8
4.5. G3 All: HY Issuance ............................................................................................................................... 8
4.6. G3 All: HY Outstanding .......................................................................................................................... 8
4.7. LCY All: Total Issuance .......................................................................................................................... 9

5. China – Domestic ........................................................................................................................................... 10
5.1. Domestic CNY All: Total Issuance ....................................................................................................... 11

Page | i5.2. Domestic CNY All: Total Outstanding .................................................................................................. 11
5.3. Domestic CNY All: Issuance by Rating ................................................................................................ 11
5.4. Domestic CNY All: Outstanding by Rating ........................................................................................... 115.5. Domestic CNY All: Issuance by Tenor ................................................................................................. 11
5.6. Domestic CNY All: Outstanding by Remaining Tenor ......................................................................... 115.7. Domestic CNY All: Issuance by Sector ................................................................................................ 125.8. Domestic CNY All: Outstanding by Sector ........................................................................................... 12

6. China – CNH ................................................................................................................................................... 126.1. CNH All: Total CNH Issuance .............................................................................................................. 13
6.2. CNH All: Total Outstanding .................................................................................................................. 13
6.3. CNH All: Issuance by Rating ................................................................................................................ 13
6.4. CNH All: Outstanding by Rating ........................................................................................................... 13
6.5. CNH All: Issuance by Tenor ................................................................................................................. 13
6.6. CNH All: Outstanding by Remaining Tenor ......................................................................................... 13
6.7. CNH All: Issuance by Sector ................................................................................................................ 14
6.8. CNH All: Outstanding by Sector ........................................................................................................... 14

7. Spreads, Credit & Total Return ...................................................................................................................... 15
7.1. Global HG Corporate Spreads ............................................................................................................. 16
7.2. Global HY Corporate Spreads ............................................................................................................. 16
7.3. China Interbank AAA - BBB Corps Fixed Rate Curve ......................................................................... 16
7.4. CNH HG Yield Curve ........................................................................................................................... 16
7.5. CNH HY Yield Curve ............................................................................................................................ 16
7.6. CNH NR Yield Curve............................................................................................................................ 16
7.7. Global Returns, Quarter-End ............................................................................................................... 17
7.8. Global Returns, 2018 ........................................................................................................................... 17
7.9. Asia Upgrades / Downgrades ex DM Asia ........................................................................................... 17
7.10. Asia Upgrades / Downgrades, DM Asia ............................................................................................. 17
7.11. Asian Upgrades & Downgrades, Standard & Poor's, First Quarter 2018 .......................................... 17
7.12. Asian Defaults, Standard & Poor's, First Quarter 2018 ..................................................................... 17

8. Summary of the Methodologies Adopted for this Report ............................................................................ 18
9. Disclaimer ...................................................................................................................................................... 23
10. Credit ........................................................................................................................................................... 23

Page | ii

2. G3 Asia ex Developed Market Asia (Japan, Australia and New
Zealand)Market Overview and Highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in First
Quarter 2018
Total issuance in 1Q’18 came in at USD 75.5 billion (bn) as of March 31, down 10.9% quarter-over-quarter(qoq) from 4Q’17 (USD 84.8bn) and down 9.2% year-over-year (yoy), inclusive of high grade (HG), high yield(HY), and unrated deals. Slowing Chinese credit growth, coupled with higher US interest rates and widening
credit spreads across the globe at a time of increased market volatility, all contributed to the slowdown in
issuance – even so, in absolute terms, issuance remains robust as issuers have generally rushed to complete
deals ahead of even higher US interest rates, which are expected as the year progresses.
1) HG issuance (of USD 54.bn) continues to easily outpace HY issuance of USD 14.2bn. However, HY
issuance continues to remain at elevated levels, with first quarter issuance of USD 14.2bn only slightly
below 4Q’17 issuance (USD 14.3bn).
2) With Chinese investors increasingly becoming dominant in the Asian G3 bond markets and with
Chinese issuers accounting for over 50% of total Asian G3 debt outstanding, the Asian bond markets
have progressively become more “localized”, with international investors from Europe and the US
accounting for a considerably lower proportion of the investor base, relative to previous years.
3) However, this is set to change going forward, as one of the reasons for Chinese investors’ preference
for Asian bonds over the last few years was the relatively low funding costs – however, this haschanged in recent months as short-dated LIBOR has surged; coupled with a marked curve flattening
in yield curves, this has made the holding of Asian bonds for purely funding-driven considerations
unattractive. On balance, we should see at least a partial reversal of recent trends, with the relative
levels of foreign investor interest in Asian bonds once again picking up compared to past years over
the rest of 2018.
4) Looking ahead, there could be some pressure on Chinese credit spreads, as refinancing risk remains
high – a large volume of property bonds (including those issued in 2017 with sub-one year maturities)
and LGFVs (Local Government Financing Vehicles) have to be refinanced in 2018. This, coupled withoverall market volatility, is likely to keep investors somewhat defensive and more selective, withrespect to individual credits.
5) Turning to other markets, India is also likely to attract investor interest – the Indian banking system
has been weighed down by a large volume of NPLs (non performing loans), which need resolution.
However, the passage of a much-improved framework for bankruptcy and resolution of corporates acouple of years ago has given a boost to foreign investor interest in India, not just in distressed debt,
but in debt markets overall. Increased confidence in the Indian bankruptcy/insolvency process on thepart of foreign investors will also boost the Indian debt markets – specifically, to investor
diversification into corporate bonds and away from LCY government debt and quasi-sovereign fixedincome instruments.
Key trends in Asia (ex-Japan, Australia and New Zealand) G3 & LCY bond issuance
For the first quarter 2018, total G3 issuance stood at USD 75.5bn, down 10.9% qoq and 9.2% yoy. China
remains the largest issuing country in the first quarter, dominating Asian issuance at USD 51.2bn, or
approximately 67.9% of G3 issuance; of first quarter volume, USD 35.5bn and USD 10.3bn were in HG and HYPage | 1

deals, respectively. South Korea reasserted itself as the second largest issuer with USD 6.2bn of issuance,
followed by Indonesia with USD 4.6bn
Finance remains the largest sector of G3 issuance in the first quarter (USD 23.8bn), followed by realestate/property (USD 11.7bn) and computers & electronics (USD 10.8bn).
In terms of ratings, within the HG space, BBB transactions accounted for the largest share of deals priced
during the quarter, with USD 11.3bn in total issuance, followed by A+ rated transactions totaling USD 11.1bn.
Within HY issuance, the BB- category led with USD 4.3bn of issuance, followed by B rated transactions of USD
3.1bn.
By tenor, Asia ex-Japan, Australia and NZ G3 deals with tenors of 5 years or less continued to account for thebulk of issuance in 1Q’18, with a total of USD 45.2bn in short tenor issues being priced during the quarter. Of
these, USD 28.8bn were HG deals, USD 10.9bn were HY deals and the balance unrated.
Overall G3 debt outstanding in the region stood at USD 1.1tn at the end of March 2018, increasing 4.0% qoq
and 18.0% yoy. High grade debt accounted for the bulk of total outstanding debt at USD 718.3bn (a 3.0%
increase qoq and 27.4% increase yoy), followed by unrated debt at USD 237.3bn (a growth of 8.2% qoq and35.8% yoy). HY debt was USD 137.7bn (an increase of 2.7% qoq but a decline of 26.6% yoy).
China (with USD 528.9bn), South Korea (with USD 121.6bn) and Hong Kong (with USD 115.8bn) remain thethree regions with the largest shares of G3 debt outstanding. Ratings-wise among HG issuers, deals rated BBB(USD 144.6bn) account for the largest share of debt outstanding, while B+ transactions outstanding (USD
30.7bn) dominate in the HY space. By sector, financials with a total of USD 336.0bn accounted for 31% of
outstanding G3 paper, followed by sovereigns (USD 247.7bn) and energy (USD 110.8bn). Finally, deals withremaining tenors of 5 years or less (USD 694.9bn) accounted for the bulk of total Asia (ex-Japan, Australia and
NZ) debt outstanding.
Turning to the LCY debt markets, USD 183.5bn in total LCY-denominated debt was issued in Asia (ex-Japan,
Australia & NZ) in 1Q’18, a decline of 0.1% qoq (USD 183.7bn) but an increase of 12.0% yoy (USD 163.8bn).
China remains the largest issuer in the LCY debt markets in the fourth quarter, with USD 119.8bn issued,
followed by South Korea (USD 28.3bn). India reasserted itself in third place with USD 12.0bn in issuance in
1Q’18. Finance continues to remain the largest category in 1Q’18 with USD 71.6bn issued, followed byconstruction (USD 25.3bn) and real estate (USD 21.9bn).
Total LCY debt outstanding at the end of 1Q’18 in Asia (ex-Japan, Australia and NZ) stood at USD 17.0tn, risingby 3.3% qoq, with HG and unrated debt outstanding increasing 0.4% and 3.5% qoq, respectively. HY debt
declined 0.5% to $12.4bn. China remains the bulk of total outstanding LCY debt at USD 11.5tn, followed byIndia (USD 1.9tn) and South Korea (USD 1.5tn).
State of the Asian leveraged loan market
Asian leveraged loan debt, excluding developed market Asia, reached USD 53.7bn in 1Q’18, a 29.3% decline
qoq but a 57.5% increase yoy. Leading sectors in 1Q’18 issuance were oil & gas (USD 9.1bn), transportation(USD 8.9bn), and real estate/property (USD 6.0bn). Leveraged loan issuance was primarily used for project
financing (USD 23.0bn) and refinancing (USD 8.6bn). Sponsored loan deals as a percentage of issuanceplummeted in the first quarter, representing a mere 0.7% of deals by dollar amount.

Page | 2

2.1. G3 ex DM Asia: Total Issuance2.2. G3 ex DM Asia: Total Outstanding

G3 ex DM Asia: Total Issuance2009 - 2018:Q1
350,000

G3 ex DM Asia: Total Outstanding
2013:Q3 - 2018:Q1$ millions

1,200$ billions

NR

300,000

HY

NR
1,000

HY

HG

250,000

HG
800

200,000600

150,000
100,000

400

50,000

200

0
2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0
Q3

Q1

Q4

Q1

2013

Q2

Q3

Q4

Q1

2014

Q2

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q4

Q1

2.4. G3 ex DM Asia: HG Outstanding

G3 ex DM Asia: HG Issuance2009 - 2018:Q1
250,000

Q3

2017
2018
Source: Bloomberg

Source: Dealogic

2.3. G3 ex DM Asia: HG IssuanceQ2

G3 ex DM Asia: HG Outstanding
2013:Q3 - 2018:Q1$ millions

800$ billions

700

200,000600

150,000

500
400

100,000
300
200

50,000

100

0
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0
Q3

Q1

Q4

Q1

2013

Q2

Q3

Q4

Q1

2014

Q2

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q4

Q1
2018

Source: Bloomberg

2.6. G3 ex DM Asia: HY Outstanding

G3 ex DM Asia: HY Issuance2009 - 2018:Q1
100,000

Q3

2017

Source: Dealogic

2.5. G3 ex DM Asia: HY IssuanceQ2

G3 ex DM Asia: HY Outstanding
2013:Q3 - 2018:Q1$ millions

400

Corp HY andNR
Sovereign
HY and NR

90,00080,00070,00060,000$ billions

NR

350

HY
300

250

50,000200

40,000150

30,00020,000100

10,000

50

0
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q1

0
Q3

Q4

2013
Source: Dealogic

Q1

Q2

Q3

2014

Q4

Q1

Q2

Q3

2015

Q4

Q1

Q2

Q3

2016

Q4

Q1

Q2

Q3

2017

Q4

Q1

2018

Source: Bloomberg

Page | 3

2.7. G3 ex DM Asia: Total Issuance by Country

2.8. G3 ex DM Asia: Total Outstanding by Country

G3 ex DM Asia: Total Issuance by Country
2018:Q1G3 ex DM Asia: Total Outstanding by Country
2018:Q1$ millions

NR

16,000HG
14,000HY

12,00010,0008,000$6,175.0

6,000$4,550.0$3,900.0

4,000$3,200.0$2,360.02,000
0$1,730.0$1,411.0$700.0China

South Korea

Indonesia

India

Philippines

Hong Kong

TaiwanSingapore

Thailand$250.0
Malaysia

CHINA
SOUTH KOREA
HONG KONG
INDONESIAINDIA
SINGAPORE
PHILIPPINESMALAYSIATHAILANDSRI LANKAPAKISTANTAIWANMONGOLIAVIETNAMMACAU
BANGLADESH
MALDIVES
FIJI$ billions

18,000

0

100

200

300

400

500

2.9. G3 ex DM Asia: Total Issuance by Sector

600

Source: Bloomberg

Source: Dealogic

2.10. G3 ex DM Asia: Total Outstanding by Sector

G3 ex DM Asia: Total Issuance by Sector
2018:Q1G3 ex DM Asia: Outstanding by Sector
2018:Q1

Finance
Real Estate/Property
Computers & Electronics
Chemicals
Government
Holding Companies
Utility & Energy
Transportation
Metal & SteelOil & Gas
Construction/Building
MiningAuto/Truck
Insurance
Dining & Lodging
Machinery
Food & Beverage
Agribusiness
Leisure & Recreation

HY

Financials

HG

Government

NR

HY

EnergyHG

Real EstateNR

Utilities
Industrials
Materials
Consumer Discretionary$ millions

Consumer Staples$ billions

Communications
Technology
Health Care

0

5,000

10,00015,00020,00025,000

0

50

100

150

200

250

300

Source: Dealogic

2.11. G3 ex DM Asia: HG Issuance by Rating

350

400

Source: Bloomberg

2.12. G3 ex DM Asia: HG Outstanding by RatingG3 ex DM Asia: HG Issuance by Rating
2018:Q1G3 ex DM Asia: HG Outstanding by Ratings
2018:Q1

BBB-

A
A+

BBB

AAAA
AA

AA-

AA+
AA-

A+

AAA

AA

BBB
$ billions$ millions

AA

BBB+
BBB-

0

2,000

4,000

6,000

8,000

10,00012,000Source: Dealogic

0

20

40

60

80

100

120

140

160

Source: Bloomberg

Page | 4

2.13. G3 ex DM Asia: HY Issuance by Rating

2.14. G3 ex DM Asia: HY Outstanding by RatingG3 ex DM Asia: HY Issuance by Rating
2018:Q1G3 ex DM Asia: HY Outstanding by Rating
2018:Q1BB+

NR

Sovereign

B

Corp
BB-

B+

B-

BB

BB
B+

BB+
BB-

B-

Not
rated

CCC

Corp

CCC+

Sovereign

DDD+
0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

50

100

150

200

Source: Dealogic

2.15. G3 ex DM Asia: Total Issuance by Tenor$ billions$ millions

C+
B

250

Source: Bloomberg

2.16. G3 ex DM Asia: Outstanding by Remaining
Tenor

G3 ex DM Asia: Total Issuance by Tenor
2018:Q1G3 ex DM Asia: Outstanding by Remaining Tenor
2018:Q1

10+ Years

HY

HY

10 +

HG

HG

NR

7 - 10 Years

NR
8 - 10 Years

5 - 7 Years$ millions

Other

0

5,000

$ billions

5 - 7 Years

0 - 5 Years<5

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
0

100

200

300

400

500

Source: Dealogic

2.17. Asia ex DM: Total Leveraged Loan Issuance

600

700

800

Source: Bloomberg

2.18. Asia ex DM: Total Leveraged Loan Issuance by
Use of Proceeds

Asia ex DM: Leveraged Loan Issuance2009 - 2018:Q1
300,000$ millions

Asia ex DM: Leveraged Loan Issuance by Use of Proceeds
2018:Q1

250,000
Project Financing
Refinancing

200,000

Working Capital
150,000

Capital Expenditures
General Corporate Purposes

100,000

Repay Debt
Acquisitions

50,000Property
Future Acquisitions
2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
Q1

Source: Dealogic

Millions0
AircraftShipping
0

5,000

10,00015,00020,00025,000Source: Dealogic

Page | 5

3. LCY Asia ex Developed Market Asia (Japan, Australia and New
Zealand)3.1. LCY ex DM Asia: Total Issuance3.2. LCY ex DM Asia: Total Outstanding

LCY ex DM Asia: Total Issuance2009 - 2018:Q1
1,400,000

LCY ex DM Asia: Total Outstanding
2013:Q3 - 2018:Q1$ millions

18,0001,200,000

16,0001,000,000

14,000$ billions

NR

HY
HG

12,000800,000
10,000600,000

8,000

400,000

6,000

200,000

4,000
2,000

0

2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0
Q3

Q1

Q4

Q1

2013

Q2

Q3

Q4

Q1

Q2

2014

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

$28,271.7$6,153.1

THB$5,489.1

SGD$3,999.5

INR$2,584.5

CNY$2,040.0

HKD$1,775.5

PHP$769.1

TWD$536.20$ millions$12,027.8

20,00040,00060,00080,000100,000

120,000

140,000

Source: Dealogic

Finance
Construction/Building
Real Estate/Property
Transportation
Utility & Energy
MiningHolding Companies
Chemicals
Metal & SteelFood & Beverage
Telecommunications
Insurance
Healthcare
Computers & Electronics
Professional Services
RetailAuto/Truck
Oil & Gas
Agribusiness
Machinery
Dining & Lodging
TextilePublishingForestry & Paper
Consumer Products
Leisure & Recreation
Government$7,400.3$6,468.0$5,752.2$3,583.4$3,486.2$3,113.0$2,066.8$1,996.5$1,609.4$1,599.2$1,297.4$1,127.3$1,054.2$946.9$705.2$423.2$393.7$362.4$316.0$250.1$233.4$147.6$63.2
010,000$71,587.2$25,261.8$21,862.7$20,362.8

20,000$ millions$119,823.6

MYR

Q1

LCY ex DM Asia: Issuance by Sector
2018:Q1

CNH

IDR

Q4

3.4. LCY ex DM Asia: Issuance by Sector

LCY ex DM Asia: Issuance by Currency
2018:Q1

KRW

Q3

2017
2018
Source: Bloomberg

Source: Dealogic

3.3. LCY ex DM Asia: Issuance by Currency

Q230,00040,00050,00060,00070,00080,000Source: Dealogic

3.5. LCY ex DM Asia: Outstanding by Country
LCY ex DM Asia: Outstanding by Country
2018:Q1$11,472.7

CHINA
INDIA
SOUTH KOREA
MALAYSIATHAILANDTAIWANINDONESIASINGAPORE
HONG KONG
PHILIPPINESPAKISTAN
VIETNAM
SRI LANKABANGLADESHPAPUA N.GUINEA
LAOS
FIJI
MACAU
AFGHANISTANBRUNEIMONGOLIA$1,906.5$1,504.50

2,000$ millions$378.2$345.4$276.9$270.4$265.3$221.2$126.1
$81.4
$53.3
$38.8
$17.3
$5.2
$1.7
$0.8
$0.5
$0.3
$0.2
$0.2
4,000

6,000

8,000

10,00012,00014,000Source: Bloomberg

Page | 6

4. All Asia
Total Issuance & Outstanding – G3 and LCY for Asia (including Japan, Australia and New Zealand)
Total G3 issuance in Asia (including Japan, Australia and New Zealand) was USD 148.3bn in the first quarter of
2018, a decline of 9.3% qoq and a decline of 15.3% yoy. In 1Q’18, total HG G3 issuance in Asia was USD
110.4bn, a decline of 7.1% qoq and a decline of 11.8% yoy; HY issuance was USD 16.2bn, an increase of 13.6%
qoq but a decline of 31.7% increase yoy; and unrated issuance was USD 21.6bn, a decline of 29.4% qoq and a
decline of 17.1% yoy.
LCY debt issuance, including Japan, Australia, and New Zealand, plummeted to USD 247.2bn in the first quarterof 2018, a decline of 50.6% qoq and a decline of 50.9% yoy, comprised of USD 88.2bn in HG issuance, USD
3.9bn in HY issuance and USD 155.2bn in unrated issuance.
Tighter credit conditions, combined with steepening yield curves amid higher inflation across the regional
economies undermined issuance. Following the 19th Congress, the Chinese authorities have signaled theirdetermination to lower the unchecked growth in leverage among Chinese enterprises – this has also
contributed to the dampening of issuance volumes.
However, the overall trend towards market liberalization and opening continues unabated, at least as far as
China is concerned. Following increased market access to overseas investors via the China Interbank Bond
Market (CIBM), the introduction of the HK-China “Bond Connect” in mid-2017 has provided yet another accesschannel for foreign investors looking to invest in the domestic Chinese bond markets. Finally, the partial
inclusion of Chinese bonds in various global/regional local currency bond indices will translate into substantial
sums of “passive” investment flows directed into the Chinese fixed income markets, as foreign fund managers
seek to replicate the holdings of Chinese bonds in the various indices. So overall, this should prove supportive
for Chinese bond markets at the margin – longer-term, this will also help to support increased issuance in theworld’s third largest bond market, which is soon set to surpass Japan as the second largest bond market
globally.
Additionally, from the viewpoint of foreign investors, domestic rates in a number of markets (especially India
and China) are higher than the corresponding USD rates/yields available on comparable credits. This is yet
another factor driving increased investment in LCY-denominated assets. However, this could be offset to someextent by USD strength going forward – the US currency has been noticeably weak for several months now
and there are hints that there could be a trend reversal. With the benchmark 10-year US Treasury notebreaching the psychologically important barrier of 3.0%, yields on USD fixed income assets could also start tolook attractive; coupled with USD strength, this could yet prompt at least some foreign investors to delay ordefer their domestic LCY investments.
So clearly, there are conflicting factors that have contributed to make the investment environment particularly
challenging in 2018. That said, we are confident that the trend towards investor inflows into LCY debt
instruments, particularly in the Asian Emerging Market (EM) space should continue, given the region’s strong
growth prospects. It is worth noting that foreign investment in the Chinese fixed income markets is in the low
single digits – less than 2.0% by some estimates. Given this extremely low base, it is a safe bet that theinternational share of the Chinese bond market is set to grow for a long time to come.

Page | 7

4.1. G3 All: Total Issuance4.2. G3 All: Total Outstanding
G3 All: Outstanding in Asia
2013:Q3 - 2018:Q1

G3 All: Issuance2009 - 2018:Q1
800,000

12,200$ millions

700,000
600,000

NR

12,100HG

12,000HY

11,900500,000$ billions

11,80011,700400,000

11,600300,000
11,500200,000

11,400100,000

11,300
11,200

0

2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

11,100
Q3

Q1

Q4

Q1

2013

Q2

Q3

Q4

Q1

2014

Q2

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q4

Q1

4.4. G3 All: HG Outstanding

G3 All: HG Issuance2009 - 2018:Q1
600,000

Q3

2017
2018
Source: Bloomberg

Source: Dealogic

4.3. G3 All: HG Issuance

Q2

G3 All: HG Outstanding
2013:Q3 - 2018:Q1$ millions$ billions

12,000500,000

10,000400,000

8,000

300,000

6,000

200,000

4,000

100,000
2,000

0
2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0
Q3

Q1

Q4

Q1

2013

Q2

Q3

Q4

Q1

2014

Q2

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q4

Q1
2018

Source: Bloomberg

4.6. G3 All: HY Outstanding

G3 All: HY Issuance2009 - 2018:Q1
250,000

Q3

2017

Source: Dealogic

4.5. G3 All: HY Issuance

Q2

G3 All: HY Outstanding
2013:Q3 - 2018:Q1$ millions

12,000$ billions

Corp HY & NR
200,000

10,000

Sovereign HY
& NR

8,000

150,000

6,000

100,000

4,000

NR

50,000

HY

2,000
0
2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
Q1

0
Q3

Q4

2013
Source: Dealogic

Q1

Q2

Q3

2014

Q4

Q1

Q2

Q3

2015

Q4

Q1

Q2

Q3

2016

Q4

Q1

Q2

Q3

Q4

Q1

2017
2018
Source: Bloomberg

Page | 8

4.7. LCY All: Total Issuance
LCY All: Total Issuance in Asia
2009 - 2018:Q1
3,500,000$ millions

HY
3,000,000

HG
NR

2,500,000
2,000,000
1,500,000

1,000,000
500,000
0
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q1
Source: Dealogic

Page | 9

5. China – Domestic
Total Issuance & Outstanding – Domestic CNY issuanceTotal domestic CNY issuance stood at USD 119.8bn in the first quarter of 2018, down 12.6% from the fourth
quarter (USD 137.2bn) but up 16.5% yoy (USD 102.9bn). By tenor, 77.2% of first quarter issuance (USD 92.5bn)
would mature in five years or less, followed by the 7-10 year bucket (USD 14.3bn, or 12.0% of issuance). By
sector, finance led issuance totals (USD 32.3bn), followed by construction (USD 23.6bn) and transportation(USD 17.6bn). Outstanding domestic CNY debt stood at USD 11.2tn at the end of first quarter 2018, withsovereigns leading totals (USD 6.3tn), followed by financials (USD 2.9tn) and industrials (USD 878.0bn).
While there has been some de-leveraging at the margin following the determination of the Chinese authorities
to reduce NPLs and clean up the Chinese banking system generally, there are enough reasons why Chinese
domestic debt issuance cannot contract significantly – even to sustain lower rates of growth while at the sametime allowing firms to roll over / refinance existing debt, this would necessarily support a reasonably high levelof continued debt issuance. Also, with international investment flows into Chinese fixed income also set torecord significant increases for the reasons discussed earlier, this will also underpin more debt issuance.
Finally, the Chinese authorities are committed to the “Belt and Road Initiative”, which will necessitate massive
investments in infrastructure, which in turn will have to be funded by bond issuance – including panda bonds(domestic CNY-denominated bonds issued by international issuers), which is set for significant growth. There
has been reasonably sustained sovereign panda bond issuance, which is likely to be complemented by more
corporate panda issuance, as and when issuers judge the timing to be right.

Page | 10

5.1. Domestic CNY All: Total Issuance

5.2. Domestic CNY All: Total Outstanding

Domestic CNY All: Total Domestic Issuance2009 - 2018:Q1
1,200,000

Domestic CNY All: Total Outstanding
2014:Q1 - 2018:Q1$ millions

12,000,000

1,000,000$ millions

10,000,000

800,000

8,000,000

600,000
6,000,000
400,000
4,000,000
200,000
2,000,000
0
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0
2014Q1

Q1

2014Q3

2015Q1

2015Q3

2016Q1

2016Q3

2017Q1

Source: Dealogic

5.3. Domestic CNY All: Issuance by Rating

2017Q3

2018Q1

Source: Bloomberg

5.4. Domestic CNY All: Outstanding by Rating
Domestic CNY All: Outstanding By Rating
2018:Q1

Domestic CNY All: Issuance by Rating2009 - 2018:Q1
100%

Not rated
BB
A
AAA

90%
80%
70%

B
BBB
AA

60%
NA/NR

50%

$11,224,969.8

40%
30%

$ millions

20%

10%
0%
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q1

0

2,000,000

4,000,000

6,000,000

8,000,000

5.5. Domestic CNY All: Issuance by Tenor

10,000,000

12,000,000

Source: Bloomberg

Source: Dealogic

5.6. Domestic CNY All: Outstanding by Remaining
Tenor

Domestic CNY All: Total Issuance by Tenor
2009 - 2018:Q1
Domestic CNY All: Outstanding By Remaining Tenor
2018:Q1100%
90%
9,000,000

80%
70%

7,000,000

60%
50%

Other

40%

10+ Years30%

7 - 10 Years

20%
10%

$ millions

8,000,000$7,835,442.0

6,000,000
5,000,000
4,000,000

5 - 7 Years

13 Months - 5 Years

3,000,000
2,000,000

0%
2017
2009

2010

2011

2012

2013

2014

2015

2016

2017

$1,167,815.4

2018
Q1

Source: Dealogic$1,435,266.6$786,445.8

1,000,000
0< 5 Years

5 - 7 Years

7+ - 10 Years

10+ Years
Source: Bloomberg

Page | 11

5.7. Domestic CNY All: Issuance by Sector

5.8. Domestic CNY All: Outstanding by Sector
Domestic CNY All: Total Outstanding By Sector
2018:Q1

Finance
Construction/Building
Transportation
Real Estate/Property
MiningHolding Companies
Utility & Energy
Metal & Steel
Healthcare
Insurance
Chemicals
Auto/Truck
Food & Beverage
Professional Services
Computers & Electronics
RetailPublishing
TextileAgribusinessTelecommunications
MachineryConsumer Products
Oil & Gas
Forestry & Paper
Leisure & Recreation
Dining & Lodging
Government$23,563.59$6,211.59$5,266.61$4,406.16$2,647.37$1,609.41$1,342.84$1,263.99$999.10$933.83$880.09$694.79$642.45$315.98$307.59$269.01$245.76$238.88$223.13$189.76$158.26$147.64$79.15$63.200

5,000

10,000$32,274.50$17,604.73$17,260.04

Government$6,304,206.5

Financials$2,889,962.9

Industrials$877,964.4$ millions

Real Estate$263,270.3

Energy$220,653.8

Utilities$206,675.2

Materials$203,319.5

Consumer Discretionary$142,473.1

Consumer Staples$39,106.8

Technology$33,568.1

Health Care

$24,993.4

Communications$18,775.7
015,00020,00025,00030,00035,000Source: Dealogic$ millions

Domestic CNY All: Total Issuance by Sector
2018:Q1

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000
Source: Bloomberg

6. China – CNH
Key trends in offshore renminbi (CNH) and the dim sum bond markets

The pace of offshore issuance picked up in the first quarter from the fourth quarter; an equivalent of USD
3.8bn in CNH bonds were issued, an increase of 43.7% qoq and an increase of 85.6% yoy. In terms of tenor,
virtually all (95.0%) all of first quarter issuance was accounted for by transactions with tenors of 5-years or
less. HG deals rated A+ totaling USD 785.1mn had the highest share among rated deals (20.5%). In terms ofsector, finance was the largest issuer in 1Q’18 (USD 1.6bn), followed by real estate (USD 1.4bn) andtransportation (USD 251.7mn).
CNH Deposit Base by Location Amt (USD bn)
Hong Kong
87.7
Singapore
24.2
Taiwan51.3
Korea, Republic of
1.1
Luxembourg
9.8
United Kingdom
10.1
France3.2

As of
Feb-18Dec-17
Feb-18Mar-18Aug-15
Dec-17
Dec-15

The rebound in issuance was driven by mostly technicalfactors – primarily the renewed strength in the renminbi
after a period of prolonged weakness. The relative
attractiveness of yields in CNH-denominated assets also
helped lure investors at the margin and provided a boost toissuance, at least in the short term. However, the long-term
trends which have adversely impacted the offshore dim
Sources: HKMA (Hong Kong), MAS (Singpore), Central Bank ofsum bond markets continue to remain in place – increased
Republic of China (Taiwan), Bank of Korea (Korea), Luxembourg for
Finance (Luxembourg), Bank of England (UK), PWC (France);
onshore access for overseas investors coupled with the
Exchange Rate: CNH 6.2755 = USD 1.0, GBP 1.40 = USD 1.0
massive size of the domestic CNY market relative to theoffshore CNH market and larger pools of domestic liquidity will result in the offshore market’s continued
decline.
The total of dim sum bonds outstanding stood at USD 56.1bn at the end of the first quarter, a decline of 0.4%
qoq and 23.0% yoy. Reflecting this trend in dim sum bonds, most deposit centers resumed their decline inoffshore CNH deposits outstanding.

Page | 12

6.1. CNH All: Total CNH Issuance6.2. CNH All: Total Outstanding

CNH All: Total CNH Issuance2009 - 2018:Q1
60,000

CNH All: Total Outstanding
2013:Q3 - 2018:Q1$ millions$ millions

120,000

50,000100,000

40,00080,00030,00060,00020,00040,00010,00020,000

0
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q1

0
2013Q3

2014Q1

2014Q3

2015Q1

2015Q3

2016Q1

2016Q3

2017Q1

Source: Dealogic

6.3. CNH All: Issuance by Rating

2017Q36.4. CNH All: Outstanding by Rating
CNH All: Outstanding By Rating
2018:Q1

CNH All: Issuance by Rating2009 - 2018:Q1
NR

Not rated
BB
A
AAA

90%
80%
70%

$46,548.9

BBB+

B
BBB
AA

$326.7BBB-$426.6BBB$164.2

BB-$1,984.3

60%

B+$291.750%

B-$146.040%

B$246.4

30%

AA-

20%

AA

$320.9A+$193.2

A-$803.9

10%
0%
2017
2010

2011

2012

2013

2014

2015

2016

2017

2018
Q1

$1,740.3

A$ millions

100%

2009

2018Q1

Source: Bloomberg$2,878.9
0

5,000

10,00015,00020,00025,00030,00035,00040,000Source: Dealogic

6.5. CNH All: Issuance by Tenor

45,00050,000Source: Bloomberg

6.6. CNH All: Outstanding by Remaining Tenor
CNH All: Outstanding By Remaining Tenor
2018:Q1

CNH All: Issuance by Tenor
2009 - 2018:Q1
100%

30,000$ millions

90%
80%

25,000$25,542.2$22,556.0

70%

20,000

60%
50%

Other

40%

10+ Years30%

7 - 10 Years

20%

10%

15,00010,0005 - 7 Years
13 Months - 5 Years

5,000$2,678.8

0%
2017

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q1
Source: Dealogic$3,349.0$1,945.9

0
Short Term

13 Months - 5
Years

5 - 7 Years

7 - 10 Years

10+ Years
Source: Bloomberg

Page | 13

6.7. CNH All: Issuance by Sector

6.8. CNH All: Outstanding by Sector

CNH All: Total Issuance by Sector
2018:Q1

CNH All: Total Outstanding By Sector
2018:Q1
Financials

Finance$25,880.8$1,576.7
Government
Real Estate$1,367.8$3,169.8

Industrials
Transportation$251.7$1,618.1

Utilities$1,160.4

Government$230.4

Construction/Building$138.1

Utility & Energy

$99.4
0

2,000

$ millions

Technology

4,000

6,000

8,000

10,00012,00014,000Source: Dealogic$644.7

Consumer Staples$412.4

Consumer Discretionary$338.5Materials$206.5

Energy$73.3
0$ millions

Real Estate/Property$22,567.4

5,000

10,00015,00020,00025,00030,000Source: Bloomberg

Page | 14

7. Spreads, Credit & Total Return
Relative Value and returns (Asia ex-Japan, Australia & New Zealand G3)
HG bond spreads traded wider in 1Q’18 from the fourth quarter: Asian HG and US HG bonds on a composite
basis were quoted in March at an average spread of 124 basis points (bps) (from 116 bps in December) and
110 bps (from 100 bps in December), respectively while European HG bond issues were essentially unchanged
at 88 bps. Asian and European HY corporates traded wider in the first quarter of 2018, averaging 398 bps and364 bps, respectively, in December (from 374 bps and 360 bps, respectively, in December 2017), while USbonds only widened slightly to 364 bps in March (from 360 bps in December).
In terms of total return, emerging market Latin America and European equities were the outperformers in thefirst quarter, while developed market equities globally underperformed. Asian HG lost 1.6% in the first quarter,
while Asian HY indices lost 1.04%.
Clearly, the turn in the US interest rate cycle (10-year US treasuries have broken through the psychologicallyimportant 3.0% level), coupled with questions related to the credit quality of Chinese and Indian enterprises
and the overall contraction in Asian credit spreads in recent years to “cyclically tight” levels, is likely to giveinvestors pause – in addition, surging market volatility and increased risk aversion at the margin will contributeto 2018 being a challenging year in the Asian credit space.
In this environment, a laser-like focus on total return, in the form of relatively high coupons to offset awidening in both interest rates and credit spreads, would be the recommended approach for investors to
adopt. So the correct approach would be to concentrate on selectively choosing either beaten-down HY
names, or focusing on credits with better prospects that are likely to withstand the periodic sell-offs in bonds
between now and yearend.
Yet another consequence of the turn in investor sentiment, which has adversely impacted the performanceof USD-denominated credits, would be for investors to turn their attention towards the LCY-denominateddomestic fixed income markets – a trend very much in evidence in China in India, but also in smaller markets
such as Malaysia, where foreign investor holdings of domestic government securities has increased as aproportion of total holdings, over 2017-18. We expect this trend to continue through the rest of 2018.

Page | 15

7.1. Global HG Corporate Spreads

7.2. Global HY Corporate Spreads

Global HG Corporate Spreads
Oct. 2009 - Mar. 2018
350

Global HY Corporate Spreads
Oct. 2009 - Mar. 2018
1,200

Basis Points

Basis Points

US

US

300

Asia

1,000

Asia

EuropeEurope

250

800
200

600
150
400
100
200

50
0
Oct-09Oct-10

Oct-11

Oct-12Oct-13Oct-14Oct-15Oct-160
Oct-09Oct-17Oct-10

Oct-11

Oct-12Oct-13Oct-14Oct-15

Source: BAML

Oct-16Oct-17

Source: BAML

7.3. China Interbank AAA - BBB Corps Fixed RateCurve

7.4. CNH HG Yield Curve
CNH HG Yield Curve

China Interbank AAA - BBB Corps Fixed Rate Curve
December 31, 2017

4.9

Percent

4.7

16
14

Percent

4.5

12
4.3

10

4.1
8

3.9

3/31/20176

12/31/2017

3.7

4

3/31/2018

China Interbank AAA Corps Fixed Rate Curve
China Interbank AA Corps Fixed Rate Curve
China Interbank A Corps Fixed Rate Curve
China Interbank BBB Corps Fixed Rate Curve

2

3.5
0

5

10

15

20

25

30

0
0

5

10

15

20

25

30

35

Source: Bloomberg

35

Source: Bloomberg

7.5. CNH HY Yield Curve

7.6. CNH NR Yield Curve

CNH HY Yield Curve
8.0

CNH NR Yield Curve
4.8

Percent

Percent

4.6

7.5

4.4

7.0

4.2
6.5
4.0
6.0
3.8
5.5
3.6
5.0

3/31/2017

3/31/2017

3.4

12/31/2017
4.5

12/31/2017
3.2

3/31/2018

4.0

3/31/2018

3.0
0

1

2

3

4

5

6

Source: Bloomberg

0

2

4

6

8

10

12

14

16

Source: Bloomberg

Page | 16

7.7. Global Returns, Quarter-End

7.8. Global Returns, 2018

Total Return (Global)
2018:Q1

Total Return (Global)
2018 YTD

-8

-6

-4

-2

0

2

4

6

8

MSCI EM LatAm
MSCI EM Europe
MSCI Emerging Markets
BAML Australia Corporate
MSXI EM Asia
BAML Japan Corporate
BAML Euro Corporate
BAML Global Credit
BAML Euro High Yield
S&P
BAML Asian Dollar HY Corporate
MSCI EM EEMEABAML US High Yield Index
BAML Asian Dollar HY
BAML Asian Dollar HG Corporate
BAML Asian Dollar Index
BAML Asian Dollar IG
BAML US Corporate Index
Australian All-Ordinaries
Euro Stoxx 50
Nikkei 225
FTSE 100

10

Percent

Percent

MSCI EM LatAm
MSCI EM Europe
MSCI Emerging Markets
BAML Australia Corporate
MSXI EM Asia
BAML Japan Corporate
BAML Euro Corporate
BAML Global Credit
BAML Euro High Yield
S&P
BAML Asian Dollar HY Corporate
MSCI EM EEMEABAML US High Yield Index
BAML Asian Dollar HY
BAML Asian Dollar HG Corporate
BAML Asian Dollar Index
BAML Asian Dollar IG
BAML US Corporate Index
Australian All-Ordinaries
Euro Stoxx 50
Nikkei 225
FTSE 100

-8

-6

-4

-2

0

2

4

6

Source: S&P, BAML,
MSCI

8

10

Source: S&P, BAML,
MSCI

7.9. Asia Upgrades / Downgrades ex DM Asia

7.10. Asia Upgrades / Downgrades, DM Asia

Standard & Poor's Asia Upgrades/Downgrades ex DM Asia
2012 - 2018:Q1

Standard & Poor's Asia Upgrades/Downgrades, DM Asia Only2012 - 2018:Q1
30

30

Upgrades25

Upgrades25

Downgrades

Downgrades
20

20

15

15

10

10

5

5

0

0
FY

FY

Q1

Q1

2012 2013 2014

Q2

Q3

2015

Q4

Q1

Q2

Q3

Q4

Q1

2016

Q2

Q3

2017

Q4

Q1

FY

2018

2012 2013 2014

FY

FY

Q1

Q2

Q3

Q4

Q1

2015

Q2

Q3

2016

Q4

Q1

Q2

Q3

2017

Q4

Q1
2018

Source: Standard & Poor's

Source: Standard & Poor's

7.11. Asian Upgrades & Downgrades, Standard & Poor's, First Quarter 2018
UpgradesSouthern Cross Airports Corporation Holdings Ltd.
Yanlord Land Group Limited
GS Caltex Corp.
Toshiba Corp.

Country
Australia
Singapore
Korea, Republic of
Japan

Date
3/26/2018
3/14/2018
3/14/2018
1/19/2018

Rating
BBB+
BB
BBB+
CCC+

Downgrades
Ricoh Co. Ltd.
Glenmark Pharmaceuticals Ltd.
Ricoh Leasing Company, Ltd.
BIS Industries Ltd.
SMRT Corp. Ltd.
PT MNC Investama Tbk.
PT Pelabuhan Indonesia III (Persero) (Republic of Indonesia)

Country
Japan
India
Japan
Australia
Singapore
Indonesia
IndonesiaDate
3/6/2018
3/1/2018
3/7/2018
1/15/2018
3/13/2018
2/2/2018
3/28/2018

RatingBBB+BBBBB+DAA+
CCCBB+

7.12. Asian Defaults, Standard & Poor's, First Quarter 2018
Defaults
BIS Industries Ltd.

Country
Australia

Type
Distressed Exchange

Page | 17

8. Summary of the Methodologies Adopted for this Report
2. G3 Asia ex Developed Market Asia (Japan, Australia, and New Zealand)
Issuance
Bond transactions are sourced primarily from Dealogic, with supplemental information sourced from
Bloomberg. Unless otherwise noted, all issuance are long-term debt. High grade transactions are defined astransactions with a Dealogic “effective” rating of equal or greater than BBB-, and may include unrated
transactions based on issuer and desk notes. High yield transactions are defined as transactions with a
Dealogic “effective” rating of equal or less than BB+, and may also include unrated transactions based on
issuer and desk notes. Unrated deals are those deals with no effective rating from Dealogic.
“All Asia” issuances are defined as being a corporate bond issue having a Dealogic “deal nationality” as within
Asia, regardless of market, including domestic. Sovereign, sub-sovereign, medium-term notes, and agencies
are also included from issuance, while supranational and ABS/MBS issuers are excluded from issuance. Loansare excluded from issuance as well.
“DM”, or Developed Market Asia, include those deals with a Dealogic deal nationality from Australia, Japan,
and New Zealand. “Ex DM Asia” will refer to all deals excluding those deals with a Dealogic deal nationality
from Australia, Japan, and New Zealand.
G3 deals are defined a subset of deals in “All Asia” that are rank eligible, according to Dealogic’s rank eligibility
guidelines, with a tranche currency in US dollar (USD), European euro (EUR), or Japanese yen (JPY). There may
exist deals within “All Asia” issuance that are denominated in a G3 currency but are not rank eligible andtherefore not included in G3 tables but may be included in all other non-G3 exclusive tables.
“LCY”, or local currency, are defined as a subset of deals in “All Asia” flagged by Dealogic local currency flag.
G3 and LCY deals are not mutually exclusive and may overlap (e.g., in the case of Japanese JPY deals).
All issuances are denoted in USD equivalents based on exchange rates as of the issue date of the bond.
Outstanding
Outstanding figures are sourced from Bloomberg and contain all bonds from its corporate securities database,including private placements. Structured notes and debt secured by assets are excluded. All other criteria hew
closely to the criteria for issuance.
All outstandings are denoted in USD equivalent based on exchange rates as of quarter-end.
Outstanding G3 deals are defined a subset of deals in “All Asia” that are rated with at least one rating by oneof the four rating agencies: Fitch Ratings, Moody’s, Standard & Poor’s, or DBRS; and denominated in US dollar(USD), European euro (EUR), or Japanese yen (JPY). Deals that are not rated by one of the four rating agencies(those deals with a Bloomberg composite rating of “NA”) are excluded. The “NA” exclusion is due to overlap
between rank ineligible deals and those deals with no rating; a close analysis of the data reveals that thefigures for data excluding “rank ineligible” deals and the figures for data excluding data rated N.A. in
Bloomberg are similar.

Page | 18

2.1., 2.3, 2.5., 2.7., 2.9., 2.11., 2.13., 2.15., 2.17., 2.18.
Data are sourced from Dealogic.
Issuance by country is determined by Dealogic’s deal nationality.
Issuance by tenor is determined by years of maturity at issuance.
Issuance by sector is defined by Dealogic’s General Industry Group (“GIG”) groupings and are not analogous
to Bloomberg’s Sector grouping.
2.2., 2.4., 2.6., 2.8., 2.10., 2.12.
Data are sourced from Bloomberg.
Outstanding by rating are by current composite rating assigned by Bloomberg. Composite ratings byBloomberg are the average of ratings assigned by Moody’s, Standard & Poor’s, Fitch Ratings, and DBRS; aminimum of two ratings must be given to a bond before a composite rating is generated. “NR” denotes a bondwith a single rating assigned by the four rating agencies, whereas “NA” denotes a bond with no rating fromany of the four.
Outstanding by tenor are based on current tenor as quarter-end. “Other” includes those bonds with no listed
maturity date and perpetuals.
3. LCY Asia ex Developed Market Asia (Japan, Australia and New Zealand)
3.1. - 3.4.
Issuance data are sourced from Dealogic according to the criteria outlined in Section 1. Outstanding data aresourced from Bloomberg according to the criteria outlined in Section 1.
4. All Asia
4.1. – 4.9.
Issuance data are sourced from Dealogic according to the criteria outlined in Section 1. Outstanding data aresourced from Bloomberg according to the criteria outlined in Section 1.
5. Domestic CNY
Issuance
Bond transactions for CNY are sourced from Dealogic and are defined as all issued debt denominated inrenminbi (CNY) and in the domestic debt markets. CNY-denominated deals issued in the euro, foreign, orinternational markets are excluded. There are no restrictions on deal type and will include supranationals,
medium-term notes, money market notes, securitisations, and commercial paper debt. Due to the lower
restrictions in CNY issuance, CNY-denominated deals outside of Section 5 and 6 are a subset of the deals
contained in Section 5 and 6.
Outstanding
Bond transactions for CNY are sourced from Bloomberg and are defined as debt denominated in CNY andissued in the domestic or domestic MTN markets. CNY-denominated deals issued in the euro, foreign, orinternational debt markets are excluded. Deals include corporate high grade bonds, high yield bonds, mediumterm notes, money market and commercial paper debt. The combination of CNH and CNY debt exclude a small
minority of dual-currency deals that are non-domestic, non-dim sum debt.
All outstandings are denoted in USD equivalent based on exchange rates as of quarter-end.

Page | 19

5.1. – 5.8.
Issuance data are sourced from Dealogic in accordance to the criteria specified in Section 5. Outstanding data
are sourced from Bloomberg in accordance to the criteria specified in Section 5.
6. CNH
Issuance
Bond transactions for CNH are sourced from Dealogic and are defined as all debt denominated in renminbi(CNY) issued and in the euro, foreign, or international debt markets. CNY-denominated deals issued in thedomestic market are excluded. There are no restrictions on deal type and will include supranationals, mediumterm notes, money market notes, securitisations, and commercial paper debt. Due to the lower restrictions in
CNH issuance, CNH-denominated deals outside of Section 5 and 6 are a subset of the deals contained in Section
5 and 6.
All issuance are denoted in USD equivalents based on exchange rates as of the issue date of the bond.
Outstanding
Bond transactions for CNH are sourced from Bloomberg and are defined as debt denominated in CNY andissued in the euro, foreign, or international debt markets. CNY-denominated deals issued in the domestic
market are excluded. Deals include corporate high grade bonds, high yield bonds, medium-term notes, money
market, securitisations, and commercial paper debt. The combination of CNH and CNY debt exclude a small
minority of dual-currency deals that are non-domestic, non-dim sum debt.
All outstandings are denoted in USD equivalent based on exchange rates as of quarter-end.
6.1. – 6.8.
Issuance data are sourced from Dealogic in accordance to the criteria specified in Section 4. Outstanding data
are sourced from Bloomberg in accordance to the criteria specified in Section 6.
7. Spreads, Credit Quality & Total Return7.1. – 7.2. Global Corporate Spreads
High grade and high yield US and European corporate spreads are sourced from Bank of America-Merrill Lynch(BAML) indices. Spreads are over government debt.
US high grade spreads are sourced from BAML’s US Corporate Index (C0A0) and tracks the performance of US
dollar denominated investment grade corporate debt publicly issued in the US domestic market. Qualifying
securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch), at last 18
months to final maturity at the time of issuance, at least one year remaining term to final maturity as of therebalancing date, a fixed coupon schedule and a minimum amount outstanding of USD 250 million. Originalissue zero coupon bonds, 144a securities (with and without registration rights), and pay-in-kind securities(including toggle notes) are included in the index. Fixed-to-floating rate securities are included provided they
are callable within the fixed rate period and are at least one year from the last call prior to the date the bondtransitions from a fixed to a floating rate security. Contingent capital securities, including those with automatic
principal write-down provisions, are included in the index provided they do not have an automatic common
equity conversion, unless the conversion is activated by a regulatory authority in which case they are included.
Other hybrid capital securities, such as those that potentially convert into preference shares, those with both
cumulative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfaction
mechanisms, are also included in the index. Securities issued or marketed primarily to retail investors, equitylinked securities, securities in legal default, hybrid securitized

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corporates, Eurodollar bonds (USD securities not issued in the US domestic market), taxable and tax-exempt
US municipal securities and DRD eligible securities are excluded from the index.
European high grade spreads are sourced from BAML’s Euro Corporate Index (ER00) and tracks theperformance of EUR denominated investment grade corporate debt publicly issued in the Eurobond or Euro
member domestic markets. Qualifying securities must have an investment grade rating (based on an averageof Moody’s, S&P and Fitch), at last 18 months to final maturity at the time of issuance, at least one year
remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amountoutstanding of EUR 250 million. Original issue zero coupon bonds and pay-in-kind securities, including toggle
notes, are included in the index. Callable perpetual securities qualify provided they are at least one year fromthe first call date. Fixed-to-floating securities also qualify provided they are callable within the fixed rate period
and are at least one year from the last call prior to the date the bond transitions from a fixed to a floating ratesecurity. Contingent capital securities are included in the index provided they do not have an automaticcommon equity conversion feature; these securities with triggers activated by a regulatory authority, including
conversions into equity, qualify for inclusion. Also qualifying for inclusion are contingent capital securities withprincipal write-down triggers. Hybrid capital securities qualify for the index, including those potentiallyconverting into preference shares, those with both cumulative and non-cumulative coupon deferralprovisions, and those with alternative coupon satisfaction mechanisms. Euro legacy currency, equity-linked
and securities in legal default are excluded from the Index. Securities issued or marketed primarily to retailinvestments do not qualify for inclusion in the index.
US high yield spreads are sourced from BAML’s US High Yield Index (H0A0) and tracks the performance of US
dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and
Fitch), at last 18 months to final maturity at the time of issuance, at least one year remaining term to final
maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100
million. In addition, qualifying securities must have risk exposure to countries that are members of the FXG10, Western Europe or territories of the US and Western Europe. The FX-G10 includes all Euro members, theUS, Japan, the UK, Canada, Australia, New Zealand, Switzerland, Norway and Sweden. Original issue zero
coupon bonds, 144a securities (with and without registration rights), and pay-in-kind securities (including
toggle notes) are included in the index. Callable perpetual securities are included provided they are at least
one year from the first call date. Fixed-to-floating rate securities are included provided they are callable within
the fixed rate period and are at least one year from the last call prior to the date the bond transitions from afixed to a floating rate security. Contingent capital securities, including those with automatic principal writedown provisions, are included in the index provided they do not have an automatic common equity
conversion, unless the conversion is activated by a regulatory authority in which case they are included. Other
hybrid capital securities, such as those that potentially convert into preference shares, those with both
cumulative and non-cumulative coupon deferral provisions, and those with alternative coupon satisfaction
mechanisms, are also included in the index. Securities issued or marketed primarily to retail investors, equitylinked securities, securities in legal default, hybrid securitized corporates, Eurodollar bonds (USD securities
not issued in the US domestic market), taxable and tax-exempt US municipal securities and DRD eligible
securities are excluded from the index.
European high yield spreads are sourced from BAML’s Euro High Yield Index (HE00) and tracks theperformance of EUR denominated below investment grade corporate debt publicly issued in the euro
domestic or eurobond markets. Qualifying securities must have a below investment grade rating (based on anaverage of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance. In addition,
qualifying securities must have at least one year remaining term to final maturity, a fixed coupon scheduleand a minimum amount outstanding of EUR 100 million. Original issue zero coupon bonds, “Global”

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securities (debt issued simultaneously in the Eurobond and euro domestic markets), 144a securities and payin-kind securities, including toggle notes, qualify for inclusion in the index. Callable perpetual securities qualify
provided they are at least one year from the first call date. Fixed-to-floating securities also qualify provided
they are callable within the fixed rate period and are at least one year from the last call prior to the date thebond transitions from a fixed to a floating rate security. Contingent capital securities are included in the index
provided they do not have an automatic common equity conversion feature; these securities with triggers
activated by a regulatory authority, including conversions into equity, qualify for inclusion. Also qualifying forinclusion are contingent capital securities with principal write-down triggers. Hybrid capital securities qualify
for the index, including those potentially converting into preference shares, those with both cumulative andnon-cumulative coupon deferral provisions, and those with alternative coupon satisfaction mechanisms. Euro
legacy currency, equity-linked and securities in legal default are excluded from the Index. Securities issued or
marketed primarily to retail investments do not qualify for inclusion in the index.
Asian high grade and investment grade spreads are sourced from J.P. Morgan’s Asia Credit Index (JACI) andtracks the performance of USD-denominated Asian debt in the Asian ex-Japan region. Qualifying countries arethose Asian region excluding Japan, including: China, Hong Kong, Indonesia, India, South Korea, Sri Lanka,
Mongolia, Macao, Malaysia, the Philippines, Pakistan, Singapore, Thailand, Taiwan and Vietnam. Minimum
deal sizes are $150 million and at least 12 months to final maturity at time of issuance. Fixed and floating rate
instruments, and debt issued by sovereign, quasi-sovereign and corporate entities qualify for inclusion.
Convertible bonds do not qualify for inclusion in the index.
7.3. China Interbank AAA Yield Curve
The curve is comprised of yuan-denominated fixed-rate corporate bonds that are traded on the China
Interbank exchange. The bonds are rated AAA by local rating agencies. The values for the points on the curve
are contributed by China Government Securities Depository Trust & Clearing Co Ltd (CDC).
7.4. – 7.6. China CNH Yield Curves
The securities underlying this curve are a subset of CNH data and sourced from Bloomberg; please see section
6 for more details regarding criteria. Ratings are determined by Bloomberg composite rating. Curves are fittedusing Nelson-Siegel regression on mid-yield to maturity of underlying bonds.
7.7. – 7.8. Total Return (Quarter-End and YTD)
Total return data are sourced from various global bond and equity, including, but not limited to: the Bank ofAmerica-Merrill Lynch, Standard & Poor’s, J.P. Morgan, and MSCI,
7.9. – 7.11. Asian Issuer Rating Actions
European issuer upgrades and downgrades are sourced from S&P. and are a combination of both emerging
market, Japan, Australia, and New Zealand rating actions. Multiple upgrades or downgrades of a single issuer
are counted separately. Rating actions are inclusive of both corporate (both credit, policy, or merger-related)
as well as sovereign ratings.
Due to publication timing, these data set may run on a quarter lag.
7.12. Asian Issuer Defaults
European issuer upgrades and downgrades are sourced from S&P and are a combination of both emerging
market, Japan, Australia, and New Zealand defaults reported. Defaults are inclusive of both corporate (bothcredit, policy, or merger-related) as well as sovereign defaults.

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9. Disclaimer
The information and opinion commentary in this Asia Credit Report (Report) was prepared by the leveraged
finance division of the Asia Securities Industry and Financial Markets Association (ASIFMA) and the Securities
Industry and Financial Markets Association (SIFMA). ASIFMA and SIFMA believe that the information in theReport, which has been obtained from multiple sources believed to be reliable, is reliable as of the date of
publication. In no event, however, does either of ASIFMA and SIFMA make any representation as to theaccuracy or completeness of such information. ASIFMA and SIFMA have no obligation to update, modify oramend the information in this Report or to otherwise notify readers if any information in the Report becomesoutdated or inaccurate. ASIFMA and SIFMA will make every effort to include updated information as it
becomes available and in subsequent reports. As information is collected from multiple sources and estimatesby the individual sources may differ from one another, estimates for similar types of data could vary within
the Report.

10. Credit
ASIFMA
Vijay Chander, Executive Director, Fixed Income
Timothee Bihet, Associate
SIFMA
Kyle Brandon, Managing Director, Director of Research
Sharon Sung, Vice President, Research

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