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Charting Opportunity in Emerging Asia: Robust Debt Issuance Meets Strong Local Demand

Emerging Asia provides fixed income investors with a rapidly expanding and increasingly diversified opportunity set.

Debt markets in emerging Asia have grown more than fivefold by market capitalization since the turn of the decade, and local investors are buying a growing share of new issuance, as the chart shows. Many of the issuers are first-time “debut issuers,” which means the bonds may offer a decent new-issue premium to investors.

Emerging Asia Bonds Supported by Strong Local Demand

Emerging Asia debt is higher-rated on average (in the high BBBs) than issuance in the rest of emerging markets (averaging low BBBs), and strong in-region demand means that over the past couple of years around 75% of new emerging Asia bonds have been placed with Asian investors. These buyers tend to be more familiar with the market and issuers and are more likely to add to their holdings during periods of weakness.

These factors create strong technical support for emerging Asia debt and also make the region more resilient to U.S. dollar liquidity withdrawal than other emerging markets.

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Abhijeet Neogy

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