Debt issuances by banks in Asia-Pacific fell to the lowest in at least a year in February, as lenders from the region's major economies, notably China, stayed on the sidelines amid uncertainties around interest-rate trends and the country's troubled property market.
Banks from the world's second-largest economy were less active selling debt in the first two months of the year, dragging aggregate bond issuances by Asia-Pacific banks, according to data compiled on a best-efforts basis by S&P Global Market Intelligence. In February, just two Japanese banks — Mizuho Financial Group Inc. and Japan Bank for International Cooperation — issued bonds worth $3.10 billion, less than one-third of the $9.88 billion raised in January and $15.14 billion in the year-ago period.
Chinese banks may regain some momentum in issuing debt in the second quarter when they are more confident about the interest-rate trend, said Bruce Pang, Hong Kong-based head of macro strategy research for China Renaissance Securities.
In addition, "potential loan growth, which will increase the need for low cost capital to keep interest spread stable, could be another probable driver to get Chinese banks back in action," Pang said.
Unlike many major central banks, including the U.S. Federal Reserve, the People's Bank of China indicated its intent to ease further, including using policy rate cuts, to prop up the country's slowing economic growth. It has cut banks' reserve requirement ratios and benchmark interest rates, or loan prime rates, among other measures, since late-2021. After the People's Bank of China did not cut interest rates in March, as analysts widely expected, market expectations for a move in April have increased.
At the "Two Sessions" meetings — China's annual parliamentary meetings — regulators in China reiterated the need to maintain macro leverage stability. While this could constrain banks' bond issuances, gradual relaxations on the property sector could boost loan demand, particularly for tier 2 and tier 3 lenders, said Pang.
Even in the equity markets, banks remained inactive, as just two offerings were completed in February. China's Bank of Qingdao Co. Ltd. raised HK$266.1 million and Equitas Small Finance Bank Ltd. raised 73.7 million Indian rupees in their follow-on offerings, Market Intelligence data showed.
