Despite the increased issuance of corporate bonds last year, the volume is likely to drop this year with wider spreads over the next one to two quarters, Taiwan Ratings Corp (中華信評) said yesterday.
The economy is forecast to grow 3.4 percent this year amid soft global demand, following an increase of 4 percent in GDP last year, Moody’s Analytics said on Tuesday.
“We expect growing caution among local bond issuers and investors to result in increasingly conservative capital expenditure plans in 2012, particularly in Taiwan’s corporate sector,” Taiwan Ratings credit analyst Lan Yu-han (藍于涵) said in a statement.
According to GRETAI Securities Market data, issuance of corporate bonds grew 21.49 percent to NT$303 billion last year from 2010 and that of convertible bonds increased 30.54 percent to NT$84.2 billion, an indication that more companies used debt issues to raise funds.
However, Taiwan Ratings said the moderate economic growth forecast would restrict new corporate bond issues this year.
“The number of new convertible bond issuances declined in the second half of 2011 as investors’ appetite for highly risky assets diminished,” Lan said. “Overall bond volume remained relatively stable supported by larger issuers with a better credit rating who were still able to tap into the market.”
Nonetheless, financial debentures would remain a popular tool among banks in the near term as they seek to strengthen their capital adequacy ratios to fulfill capital strengthening and funding needs, Lan said.
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