The nation’s bond market, excluding government bonds, could see a slight resurgence in new issuance momentum in the second half of this year, after contracting 67 percent for a total of NT$77 billion (US$2.35 billion) in the first half of this year from the two previous quarters, Taiwan Ratings Corp (中華信評) said yesterday.
“Several forces may lead to increased bond issuance in the second half, including the low interest rate environment, modest signs of domestic economic recovery and the recent rebound of the domestic stock market,” said Serene Hsieh (謝雅瑛), a credit analyst at Taiwan Ratings — a local arm of Standard & Poor’s — during a teleconference.
“We also expect local banks’ increased need to strengthen their regulatory capital ratios to support greater new issuance momentum for financial debentures in the second half,” she said.
Hsieh said new issuance of corporate bonds totaled NT$46 billion in the first half of this year, nearly 77 percent down from the second half of last year.
New issuance of financial debentures by domestic banks totaled NT$31 billion in the first half of this year, 18 percent down from the second half of last year.
Another credit analyst, Daniel Hsiao (蕭黎明), said that the anticipated growth could be mild because economic uncertainty will continue to linger in the next two quarters.
Companies with good credit ratings higher than AA minus such as Formosa Plastics Group (台塑集團) and Taiwan Power Co (台電) — with the latter completing a bond issuance of NT$13 billion last month — will likely attract bond buyers, he said.
“The domestic corporate sector’s overall credit quality is on a stable to negative outlook since 20 percent of our rated clients are still assigned with a negative outlook,” Hsiao said.
Both analysts said that the nation’s bond market would continue to evolve over the longer term, given its relatively underdeveloped status compared with other regional and global bond markets.
Support for this development is likely to come from investment demand for bond issuance, market liquidity and the growing needs of various issuers as they adapt to changes in the global and local financial markets, Taiwan Ratings said.
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