HSBC-亞太地區(qū)投資策略：亞洲債券市場觀察-2021.5正文版

FixedIncome

AsiaCredit

May2021

By:HSBCAsiacreditresearchteam

TheVIEW

Asia’sBondMarkets

Goinggreener:OffshoreChinaUSD

green,socialandsustainability

bondstobenefitfrompolicypush;

weraiseourissuanceforecasts

Alsoinside

CreditStrategy:Optimismversusthe

virus–adelicatebalance

CreditReview:Themarketholdsits

nerveafterHuarong;wehighlightthe

multipleratingupliftsofChinaSOEs

andfinancialnames

Playvideowith

LouisaLam

Disclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.

FixedIncome●AsiaCredit

May2021

THISCONTENTMAYNOTBEDISTRIBUTEDTOMAINLANDCHINA

Editorial

IntheOverview,AsiaGSSbonds:Chinatobolstergreenfinancing,wehighlighthowgovernmentpoliciesarealigningthefinancialmarketwiththecountry’sclimatetargets.Thefocusisontheonshoregreenbondmarket,butwethinkthiswillalsobenefittheoffshoreChinaUSDgreenbondmarketintermsofdisclosures,informationtransparency,bondissuanceanddiversification.Takingabroaderprospective,Asiaex-JapanUSDgreen,socialandsustainability(GSS)bondshavemadeastrongcomebacky-t-dandareoncoursetohitanewrecordthisyear.Inthefirstfourmonthsoftheyear,atotalofUSD22.5bnofGSSbondswereissued,closetothefull-yearissuancein2020.Weincreaseour2021eAsiaex-Japangreenbondissuanceforecastbyc50%toUSD25-30bn,andestimatesocialandsustainabilitybondissuancewillreachUSD13-15bn,takingthetotaltoUSD38-45bn.GrowthshouldbedrivenbymainlandChineseandKoreanfinancialinstitutions,followedbyrenewablesandindustrialplayersacrossAsia.

WithregardstoCreditStrategy,wefeeloptimismandconcernarefinelybalancedbecausevaccinationandviruscontainmentarestillmovingtargets.Asaresult,webelievethebiastowardsqualityissuersandpayingapremiumforliquidityineachcreditratingbucketwillcontinuetoremainapriorityinthemonthsahead.ThisimpliesthatAsiancreditspreadswillbeconfinedtotightrangesfortherestof2Q,afterwhichspreadcompressionshouldresumeuntilyear-end.Fromanallocationperspective,wemaintainourpreferenceforthehigh-yieldChinapropertysector,whichwefeelwilloutperformoverthenext6-9monthsonthebackofimprovingcreditmetricsandtightUSDbondsupply.

InCreditReview,wediscusshowAsiaIGbondsunderperformedAsiaHYbondsandotherglobalpeersingeneralinthepastmonth.TheirperformancewasdraggedbymainlandChinaIGnamesfollowingtheHuarongincident,andIndiaIGnamesalsoweakenedduetorenewedconcernsabouttheincreasingnumberCOVID-19casesinthecountry.InApril,iBoxxADBIwidenedby6bp,withiBoxxADBI-IG8bpwider,whileiBoxxAHBItightenedby24bp.PrimaryactivitypickedupslightlyinApril.TheproportionofnewChinesebondissuanceamongAsiaex-JapanUSDbondshasfallento49%inthefirstfourmonthsof2021,from68.6%in2018.ThenumberofnegativeratingactionsinAsiarose.ChinaHuarongAMCwasdowngradedbyFitchto‘BBB’from‘A’,andbyMoody’sto‘Baa1’from‘A3’.WeattachatableofthemultipleratingupliftsformainlandChinaSOEsandfinancialnames,withmostnamesenjoyingmodestuplifts(2-4notches).Broad-baseddowngradesofChina’sgovernment-relatedentitieslookunlikely,inourview.

1

FixedIncome●AsiaCredit

May2021

India’stakethespotlightinthesovereignsectionthismonth.Witharenewedvirusoutbreak,HSBCEconomicssuggestthatrealGDPgrowthiny-o-ytermsmightslipintonegativeterritoryinboth1Qand2Q.TheeconomicweaknesswilldelaytheReserveBank’sexitfromitsaccommodativemonetarystanceandplaceadditionalpressureonthefiscalbalances.Thecreditratingagencieswillfocusonthegovernmentmeetingthefiscalmetrics,especiallywithvariousratioshavingdeviatedfrommedianforsovereignsinthe‘BBB-’to‘BBB+’ratingbucket.

TheMacaugamingsectorhasproveditselftobearelativesafehavenduringtherecentidiosyncraticcrediteventsinthemainlandChinesepropertyandfinancialsectors.Webelievethesectorwasstronglysupportedbywhatappearedtobeasectorrotation,orflight-to-quality.Meanwhile,fundamentalshavebeencatchingupwiththebondpricesasshownbythestrongbookingsfortheMayGoldenWeekholiday.Lookingahead,wethinknewsflowregardingdemandrecoveryandborderrelaxationmeasureswillcontinuetounderpinbondprices,ifnotpushthesectoraleghigher.Weupgradedoursectorstancetooverweightfromneutral,inanticipationofpositivecatalystsahead.

2

FixedIncome●AsiaCredit

May2021

Thispagehasbeenleftblankintentionally

3

FixedIncome●AsiaCredit

May2021

Contents

Editorial

1

Overview

5

AsiaCreditStrategy

17

FocusList

27

CreditReview

32

Topandbottomperformersof

themonth

39

SovereignRiskAnalysis

41

MonthlyFocus:RepublicofIndia

42

RepublicofIndonesia

45

FederationofMalaysia

52

KingdomofThailand

59

CreditResearch

67

GreenBondsinChina

68

MacauGaming

74

AsiaCreditCoverage

84

SpreadandCurveCharts

87

Appendix

95

HSBCDatabank

96

Disclosureappendix

117

Disclaimer

124

4

FixedIncome●AsiaCredit

May2021

Overview

AsiaGSSbonds:Chinato

bolstergreenfinancing

LouisaLam,CFA

CreditAnalyst,AsiaPacific

TheHongkongandShanghaiBankingCorporationLimitedlouisa.m.c.lam@.hk+85229966586

KeithChan

HeadofCorporateCreditResearch,AsiaPacific

TheHongkongandShanghaiBankingCorporationLimitedkeithkfchan@.hk+85228224522

China’ssupportforthedomesticgreenbondmarketshouldalsobenefitoffshoreUSDissuanceinthisarea

Weraiseour2021eissuanceforecastforAsiaexJapanGSSbondstoUSD38-45bn,versusUSD22.5bnissuedin4M21

Growthwillbeledbyfinancialsandpower/renewablesectors

Greatermarketawareness.AsChinatransitionstoalowcarboneconomy,thegovernmenthaslaunchedanumberofinitiativestoboostthegreenfinancemarketandraiseinvestorandissuerawareness.Whilethiswillexpandandstrengthentheonshoregreenbondmarket,wethinkitwillalsobenefittheoffshoreChinaUSDgreenbondmarketintermsofdisclosuresandinformationtransparency,issuanceanddiversification.

Bondsupplytosurge.AsiaexJapanUSDgreen,socialandsustainability(GSS)bondshavemadeastrongcomebacky-t-dandareoncoursetohitanewrecordin2021.IssuanceinthefirstfourmonthsoftheyeartotalledUSD22.5bn–USD16bnforgreenbondsandUSD6.5bnforsocialandsustainabilitybonds.That’swithinawhiskerofthetotalforthewholeof2020.Asaresult,weincreaseour2021eAsiaexJapanUSD-denominatedgreenbondissuanceforecastbyc50%toUSD25-30bnandestimatethesocialandsustainabilitybondissuancewillreachUSD13-15bn,takingthetotaltoUSD38-45bn.

Broadersectorbase.WethinkgrowthwillbeledbymainlandChineseandKoreanfinancialinstitutions.WealsoexpecttoseemoreissuancefromChina’srenewable/powersectorasthegovernmentprioritiseswindandsolarenergy,aswellasgrowingsupplyfromautomanufacturersandindustrialplayersacrossAsia.Butgreenbondsupplyintheoil&gassectorshouldgraduallydiminishas“cleanfossilfuel”projectsareexcludedfrominternationalgreenprojectguidelines.

Resilientagainstmarketvolatility.AsiaUSDGSSbondshaveoutperformedtheconventionalAsiaUSDbondmarkety-t-d.WhilethewholecreditmarkethasbeenaffectedbytheriseinUSTreasuryyields,thegreaterresilienceoftheGSSbondscanbeattributedtotheskewofsectormixtowardsfinancialandutilitiesaswellasbondholderstickiness.Investordemandhasbeenstrong,withGSSissuesinAsiabeingoversubscribedbyanaverageofc6x.Meanwhile,“greenium”–thespreaddifferentialbetweengreenandnon-greenbondsfromthesameissuer

–hasstartedtobecomevisiblebutnotsufficienttobematerial,perourestimation.

5

FixedIncome●AsiaCredit

May2021

Facilitatingcapitalflowsintogreenprojects

Chinahasalongwaytogoifitistoachievecarbonneutralityby2060andreducecarbon

Alongwaytogo

emissionintensitybyatleast65%by2030(from2005levels),withemissionspeakingbythesameyear.Toclosethebigemissiongap,itneedstoinvolvebothpublicandprivatesectorsinclimatechangeandsustainabledevelopmentaswellasotherindustryparticipants.

Inlightofthis,thePeople’sBankofChina(PBoC),togetherwithothergovernmentauthorities,recentlylaunchedanumberofinitiativestopromote,strengthen,andalignthegreenfinancemarkettoitsglobalpeers.Thegovernmentaimstoalignthefinancialmarketwiththecountry’sclimatetarget,raiseinvestorandissuerconfidenceinthegreenfinancingplatform,andchannelcapitalintogreenandclimatechangeprojects.Theinitiativesinclude:

UpdatingtheGreenBondProjectCataloguetoprovideclearerscopeofgreenprojectsandregulationtothedomesticmarketandbemorealignedwithinternationalstandards.Forinstance,itexcludes“cleancoal”activitiestoeliminateconcernsaboutpotentialgreenwashing,includesgreenagriculture,sustainablebuilding,waterconservationandgreenservices,andintroducesafourthlevelofclassification(seeFig.1)(PBoC,NDRC,CSRC,21April2021);

Increasingtheallocationofgreenbondsinforeignexchangereserves,limitinginvestmentsinhighcarbonemissionassetsandincludingclimatechangeconsiderationsinstresstestsforfinancialinstitutionsandmonetarypolicyframework(Bloomberg,21April2021);

Planningtodevelopmandatorydisclosuresoncarbonemissionandclimaterisks,startingwithfinancialinstitutions(BIS,21March2021).

Giventhissupportforgreenandclimateprojects,weexpectChina’sonshoregreenbondissuancetoincreasetoaroundUSD60bnequivalentin2021e,upfromUSD37.6bnin2020andUSD55.6bnin2019,andgrow15-20%perannuminthefollowing2-3years(GreenBondsinChina–Aligningfinancialmarketswithclimatetarget,5May2021).In1Q21,ChinaovertooktheUStoleadtheboominglobalgreenbondissuance(Reuters,1April).

KeyrevisionstoChina’sGreenBondProjectCatalogue

203projecttypes

38projecttypes

GreenServices(31)

Ecologicalprotectionandclimate

changeadaptation(4)

Greenupgradeofinfrastructure(36)

Cleantransportation(11)

ProjectScope

Ecologicalandenvironment-

Useofresources(7)

relatedindustry(29)

Cleanenergyindustry(26)

Cleanenergy(7)

Cleanproductionindustry(19)

Pollutionprevention(3)

Energysavingandenvironmental

Energyefficiencyenhancement(6)

protectionindustry(62)

Classification

4levels

3levels

GreenBondProjectCatalogue(2021)

GreenBondProjectCatalogue(2015)

Source:PBoC

6

FixedIncome●AsiaCredit

May2021

OffshoreChinaUSDgreenbondmarketwillbenefittoo

Whilethesemeasuresfocusonthedomesticgreenbondmarket,wethinktheoffshoreChinaUSDgreenbondmarketwillbenefittooasaresultofthefollowing:

Greaterinformationtransparency.ThePBoChasaskedpilotfinancialinstitutionstomeasurethecarbonemissionandclimaterisksoftheirgreenprojectsaswellasmakequarterlygreencreditassessmentsofbanks.Weexpectthegovernmenttoextendsimilaremissionandenvironmentaldisclosurestogreenbondissuersacrosssectorsinthenearfuture,andevenincludelistedcorporates.Bettercarbonaccountingwilldeepenunderstandingoftheclimatebenefitsofgreenbonds,thecorrespondingissuers,andtheirprojects.

Moregreenbondsupplyanddiversification.Weexpecthigherprivatesectorparticipationincarbonemissionreductionand/orclimatechangeactivities.Asaresult,thenumberofgreenprojectsandtheneedforgreenfinancingshouldsurgeintandem.Thisshoulddrivegreenbondissuance.EntitieswithbettercreditqualityarelikelytoseekoffshoreUSDbondfundingwhichwillallowthemtotapintolong-termfundingandamuchlargerinvestorbase.Wealsoexpecttoseeawiderissuerbasefromamorediversifiedsectormix.

Higherforeigninvestorinterest.WeexpectforeigninvestorstousetheoffshoreChinaUSDgreenbondsasaproxyforinvestinginChina’sgreenmarket.China’srulesondomesticgreenbondsarestillconsideredtobelessstrictthanglobalstandards.Forexample,upto50%ofthedomesticgreenbondproceedsinChinacanbeusedforrefinancingorgeneralworkingcapital,whilethisiscappedat5%underglobalstandards.Meanwhile,offshoreUSDgreenbondsusuallyfollowmorestringentgreenbondguidelines,verificationsanddisclosure/reportingrequirements.MostoftheUSDgreenbondissuerssettheirgreenbondsframeworksaccordingtotheGreenBondPrinciples2018(GBP).Separately,theoffshorebondmarketalsohasbettertradingliquiditythantheonshoremarket.

BankandpropertyarethelargestUSDgreenbondissuersinChinabysector

Renewables

Transportation

1.9%

Property

2.6%

25.6%

NBFC*

4.1%

Industrials

0.4%

Banks

Autos

56.6%

1.5%

Utilities

Oil&Gas

4.5%

2.8%

NBFC:Non-BankFinancialsSource:Bloomberg

AboutonethirdofChinadomesticgreenbondsarenotalignedwithglobalstandards

60

.

50

equv

40

bn

USD

30

Issuance,

10

20

0

2016

2017

2018

2019

2020

Alignedtoglobalstandard

Notaligned

Source:ClimateBondInitiative

PotentialUSDgreenbondsupplysurge,drivenbyfinancialsandpowersector

WeforeseemoregreenbondsupplycomingfromChinesefinancialinstitutionsandthepowersector.TheChinesefinancialsector,alreadythelargestgroupofgreenbondissuersbothonshoreandoffshore,ismakingthetransitiontogreenandsustainablefinancing.

7

PowersectorcontributesalmosthalfoftheChina’scarbonemissions

emissions

100%

80%

60%

CO2

40%

oftotal

20%

%

0%

1990

1995

2000

2005

2010

2015

2018

Power

Otherenergy

Industrial

Transport

Residential

Publicservices

Agriculture

Other

Source:IEA

FixedIncome●AsiaCreditMay2021

Chinesegovernmentaimstoexpandsolarandwindshareoftheenergymix

Oil

0.2% Natural

gas

3.3%

Hydro

17.1%

Coal

SolarPV

66.4%

2.5%

Wind

5.1%

Others Biofuels Nuclear

0.2% 1.3% 4.1%

Dataasof2018

Source:IEA

Thepowersectorcurrentlyaccountsforalmosthalfthecountry’scarbonemissions.TheChinesegovernmenttargetisforwindandsolartogeneratemorethan16%ofdomesticelectricityconsumedby2025and,togetherwithothernon-fossilfuelsources,accountfor25%ofprimaryenergyby2030.Beijingwilloffersubsidiestowindandsolarpowercompanies,andthecentralbankwillstepupfinancialsupportforthedevelopmentofwindandsolarpowergeneration.

InMarch2021,thePBoCstatedthatbankscouldmakearrangementswithrenewablecompanieswithshort-termrepaymentpressures,suchasloanextensions,refinancingorchangestotheloanrepaymentscheduleandterms.Weexpecttherenewableandutilitiessectorswilltogetheraccountforatleast10%ofChinaUSDgreenbondmarketinthecoming2-3years,upfrom6.5%asofApril2021.

8

FixedIncome●AsiaCredit

May2021

AsiaexJapanUSDGSSbondprimaryupdates

Fromtheregionalperspective,AsiaexJapanUSDgreen,socialandsustainability(GSS)bondshavemadeastrongcomebackthisyearandareoncoursetohitrecordlevelsofissuance.

Inthefirstfourmonthsof2021,greenbondissuancereachedUSD15.9bn,surpassingthe2020totalofUSD12bnandequalto90%ofthetotalsupplyin2019(USD17.5bn).Includingsocialandsustainabilitybonds,totalAsianUSDGSSbondsupplyjumpedtoUSD22.5bn,flattofull-year2020(USD22.8bn)and93%ofthe2019total(USD24.2bn).

Weraiseourfull-year2021eAsiaexJapanUSDgreenbondissuanceforecasttoUSD25-30bn,upfromUSD17-20bn,givenamorediversifiedrangeofissuersandregions.FortheUSDsocialandsustainabilitybonds,weforecastissuanceofUSD13-15bnin2021e,ledbyChineseandKoreanfinancialinstitutions.

AcrossAsia,weseepotentialsupplygrowthfromrenewables,automanufacturersinvolvedinmakingelectricvehicles,andotherindustrialplayersseekingtoreducecarbonemissions.Ontheotherhand,thesupplyofoil&gasgreenbondsshouldgraduallydiminishas“cleanfossilfuel”hasbeenexcludedfrombothChineseandinternationalgreenprojectguidelines.WithmoreissuersjoiningGSSfinancingfromawiderbaseofsectorsandregions,webelievetheGSSmarketwillbecomemorecomprehensiveanddiversifiedinthenearfuture.

AsiaexJapanUSDgreenbondsupplytosetrecordhigh…

35

30

Highyield

Investmentgrade

bn

25

20

USD

15

10

5

0

2013201420152016

2017201820192020YTD

2021e

DataasofendApril2021

Source:Bloomberg,HSBCestimates

…aswellassocialandsustainabilitybonds

16

14

12

bn

10

8

USD

6

4

2

0

2020YTD

2021e

2013

201420152016201720182019

Social

Sustainability

Pandemic

DataasofendApril2021

Source:Bloomberg,HSBCestimates

8.Primaryallocationbyregion

9.Primaryallocationbyinvestortype

US,

Insurance

8%

16.0%

Private

Bank

Fund

3%

Asia,

managers

63.8%

70%

Bank

EMEA,

15%

19.2%

Others

4%

DataasofendApril2021

Source:Bloomberg,HSBC

DataasofendApril2021

Source:Bloomberg,HSBC

9

FixedIncome●AsiaCredit

May2021

Onthedemandside,GSSbondshavebeenwellreceivedbythemarket,withissuesbeingoversubscribedbyanaverageofc6x.WhilemostofthedemandcomesfromAsia,wehaveseenstronginterestfromforeigninvestors(seeFig.8).ThisisdespitethefactthatmostHYcorporateGSSbondissuanceswereforrefinancingpurposes.

Theriseofsustainability-linkedbonds

Fivesustainability-linkedbonds(SLB)fromdifferentregionsandsectorshavebeenissuedy-t-d.SLBareanytypeofbondinstrumentwhosefinancialand/orstructuralcharacteristicsarelinkedtotheissuers’predefinedsustainabilitygoals,butthebondproceedsarenotring-fencedtobeappliedtowardsgreenorsustainablepurposes.Liketheirglobalpeers,mostofthemhavea25bpcouponstep-upiftheissuersfailtomeetthesustainabilityperformancetarget.Forexample:

JapfaComfeed–Indonesianfoodcompany–hassetthesustainabilityperformancetargetforits5-yearUSDSLBtoconstructeightwaterrecyclingfacilities(outof15slaughterhouses)underitspoultryoperationsandonewaterrecyclingfacilityatahatcherywithinthepoultrybreedunit.Ifitfailstoachievethatthreemonthspriortothefourthyearofthebond,i.e.Dec2024,itwillfacea25bpcouponstep-up.

UltratechCement–Indiancementproductmanufacturer–setthesustainabilityperformancetargetforits10-yearUSDSLBtolowerthecarbonintensitytobelessorequalto557kgCO2/t.cem(a22.2%reductionfromthe2017baseline)ortheSBTi-verifiedtarget,asof1May2030,andinanyeventnolaterthan1Aug2030.Otherwise,itwillhavea75bpcouponstep-upeffectivefrom1Aug2030.

Inourview,withthebonds’remainingtenorsfromtheircouponstep-upeffectivedatesgenerallyshort,thecouponstep-upisnotmaterial.Yet,thissignalstheissuers’commitmentstotheirsustainabilitygoals.

OtherGSShighlightsinclude:

AsiaexJapanUSDgreenbonds

Korea,mainlandChinaandIndiaarethelargestgreenbondissuersy-t-d,accountingforUSD5.6bn,USD4.3bnandUSD3.4bn,respectively.

Financials(USD2.3bn),property(USD3.1bn)andrenewablescompanies(USD2.9bn)continuedtodominatesupplyactivities.Together,theyaccountedfor52%ofthey-t-dissuance;USD2.5bnofissuancewasfromtheHongKongsovereign.

AwiderbaseofcorporatesjoinedtheirAsianpeers:Electricvehiclemanufacturers–KIAMotorandGeely;abatteryproducer–SKBattery;technologycompanies–NaverCorpandSKHynix;aswellasairports–DelhiInternationalAirportandIncheonInternationalAirport.

AsiaexJapanUSDsocialandsustainabilitybonds

Koreanfinancialinstitutionsarethebiggestissuersofsustainabilitybondsy-t-d(USD1.75bn),followedbyChineseissuers,takingthetotaltoUSD1.4bn.

Onthesovereignside,MalaysiaraiseditsfirstsustainabilitysukukbondforUSD800m.

Therehasbeennospecificpandemic-relatedbondsofarthisyear,butsomeissuershaveearmarkedpartoftheirbondproceedsforCOVID-19-relatedneedsandevents.

10

AsiaexJapanUSDgreenbondbreakdownbysectors

Transportation

Property

Sovereign

5%

10%

NBFC*

14%

4%

Industrials

Renewables

4%

18%

Utilities

Autos

7%

3%

Oil&Gas

Banks

1%

Technology

31%

3%

NBFC:Non-BankFinancialCorporationsSource:Bloomberg,HSBC

FixedIncome●AsiaCreditMay2021

AsiaexJapanUSDgreenbondbreakdownbymarkets

ID

7% IN

18%

HK

11% KR

17%

PH

2%

CN SG

43% 1%

TW

1%

PandemicbondsaregroupedinSSbonds

CN:MainlandChina,HK:HongKong,IN:India,ID:Indonesia,KR:Korea,PH:Philippines,SG:Singapore,TW:Taiwan

Source:Bloomberg,HSBC

AsiaexJapanUSDsocialandsustainabilitybondbreakdownbysectors

Property

4%

Sovereign

21%

NBFC*

Industrials

10%

2%

Utilities

5%

Banks

Oil&Gas

52%

2%

Technology

4%

NBFC:Non-BankFinancialCorporationsSource:Bloomberg,HSBC

AsiaexJapanUSDsocialandsustainabilitybondbreakdownbymarkets

KR

MY

48.5%

5.6%

PH

3.0%

SG

CN

5.7%

IN

ID

TH

12.3%

19.8%

0.4%

4.6%

PandemicbondsaregroupedinSSbonds

CN:MainlandChina,IN:India,ID:Indonesia,KR:Korea,MY:Malaysia,PH:Philippines,SG:Singapore,TH:Thailand

Source:Bloomberg,HSBC

14.AsiaPacificUSDGSSbondsaccountforc22%intheglobalcontext

Indexweight

100%

80%

60%

40%

20%

0%

2015

2016

2017

2018

2019

2020

4/2021

AsiaPac

EMEA

N.America

LatinAmerica

Supranational

Source:iBoxxUSDGlobalGreen,Social&SustainabilityBondsIndex

11

FixedIncome●AsiaCredit

May2021

Performanceandgreenium

Exhibitinghigherresilienceinavolatilemarket

TheAsiaexJapanUSDGSSbondmarkethadrelativelysteadyflowsdespitemarketvolatility.Theoutperformanceversusthebroadermarketcanbeattributedtothesectorialskewtowardsdefensivesectors–e.g.financialsandutilities–andthebettercreditqualityoftheissuersandbondholderstickiness.Bysectors,banks,renewablesandutilities’GSSbondshavehelduprelativelywell.Sovereignandtechnologybonds,despitegoodcreditquality,werehitduetolonger-datedbondtenorsandtheupswingofUSTreasuryyields.

AsiaexJapanUSDGSSbondsdemonstratedhigherresilienceagainstmarketvolatility

InvestmentGrade

HighYield

Clearnpricereturnindex

100)

110

108

as

106

104

2017

102

end

100

(Rebased

98

96

94

92

12/17

4/18

AxJIG

8/18

12/18

4/19

8/19

12/19

4/20

8/20

GSSBonds

ADBI-

12/20

IG

index

as100)

110

100

105

Cleanpricereturn

(Rebasedend2017

95

90

85

80

75

70

12/17

4/18

8/18

12/18

4/19

8/19

12/19

AxJHYGSSBonds

4/20

8/20

12/20

AHBI-Corp

Source:Bloomberg,IHSMarkit,HSBCcalculations

Source:Bloomberg,IHSMarkit,HSBCcalculations

AsiaexJapanUSDGSSbondsoutperformedtheirAsianandglobalconventionalpeers

0.0%

Cleanpricereturn

-0.5%

-1.15%

-1.27%

-1.28%

-1.24%

-2.71%

-2.91%

-2.71%

-4.0%

-1.0%

-1.5%

-2.0%

-2.5%

-3.0%

-3.5%

AxJGSSOverall

AxJGSSIG

AxJGSSHY

ADBI

ADBI-IG

AHBI-Corp

iBoxxUSDGSS

DataasofendApril2021

Source:Bloomberg,IHSMarkit,HSBCcalculations

AsiaexJapanUSDGSSbondpricereturnbysectors

0.0%

-0.5%

YTD

-1.0%

return,

-1.5%

-2.0%

price

-2.5%

-3.0%

Clean

-3.5%

-4.0%

-4.5%

Utilities

Transportation

Technology

Sovereign

Renewables

Property

Oil&Gas

NBRC*

Industrials

Banks

Autos

NBRC:Non-BankFinancialCorporatesDataasofendApril2021

Source:Bloomberg,HSBCcalculations

12

FixedIncome●AsiaCredit

May2021

Greeniumremainsimmaterial

Wehavestartedtoseeasmallgreenium1invariousissuers,butthatisstillonanindividualbasisandimmaterialintermsofthespreaddifferentials.Whilethegreeniumcouldbeduetoamorespecificinvestorbase,wealsoattributepartofthespreaddifferencetothebonds’seasonalityandtradingliquidity–i.e.recentnewissuesaremoreliquidthanseasonedbondsand,hence,thiswasreflectedinvaluations.Separately,littlegreeniumhasbeenobservedinsustainability-linkedbondssofar.Fig.18to23illustratethegreeniumwithindividualcredits’relativevaluecomparisonsacrosstheirdurationcurve.TheirGSSbondsarehighlightedingreen.

18.Malaysiasovereign(sustainabilitybond)

3.5%

3.0%

45

46

51

%

2.5%

2.0%

31

bid

Yield,

1.5%

25

1.0%

26

0.5%21

0.0%

246810121416182022Mod.Duration(yrs)

Source:Bloomberg

19.Alibaba(sustainabilitybond)

4.0%

47

57

61

3.5%

37

51

3.0%

34

41

%

2.5%

31

bid

2.0%

27

Yield,

1.5%

1.0%

212324

0.5%

0.0%

24681012141618202224Mod.Duration(yrs)

Source:Bloomberg

KIAMotor(greenbond)

2.5%

2.0%

4/26

27

10/26

%

1.5%

bid

2324

Yield,

1.0%

0.5%

0.0%

0

1

2

3

4

5

6

7

Mod.Duration

(yrs)

Source:Bloomberg

21.SKHynix(greenbond)

3.5%

3.0%

31

%

2.5%

2.0%

bid

26

Yield,

1.5%

1.0%

9/24

1/24

0.5%

0.0%

0

2

4

6

8

10

Mod.Duration

(yrs)

Source:Bloomberg

CentralChi