China breaks records with $14b in offshore convertible bonds

Chinese major companies have set a new record in the offshore convertible bond market by raising $14 billion in 2024, a significant increase of 1,588 per cent from the previous year.

This surge reflects their strategy to diversify funding sources amid high interest rates.

Leading the charge are tech giants like Alibaba Group, which secured $5 billion in May, and Ping An Insurance, which finalised a $3.5 billion deal last week.

As a result, mainland China now accounts for a significant 22 per cent share of all globally issued convertible bonds, according to data from LSEG.

This surge in activity is offering a glimmer of hope for a revival in capital markets, particularly in Hong Kong, where initial public offerings (IPOs) have plunged to their lowest level in 15 years. The previous high for Chinese convertible bond issuance was $10.9 billion in 2021.

Saurabh Dinakar, co-head of Asia Pacific Global Capital Markets at Morgan Stanley, attributes the renewed interest to a return of investor confidence in the Chinese market after a period of cautious withdrawal during the pandemic recovery.

He notes an “uptick in dialogue” between investors and Chinese companies, indicating a growing willingness to re-engage.

The global convertible bond market has also seen a significant boost, with issuance reaching $64.2 billion in 2024. Notably, Japan has experienced a 486.2 per cent increase in deal value compared to the previous year, according to LSEG data.

Investors purchase convertible bonds for the potential of equity gains, along with receiving coupon payments and having their principal repaid at maturity if the conversion option is not utilised.

Bank of America (BofA) has increased its global convertible bond issuance forecast for the year by 11 per cent, projecting up to $110 billion in deals in 2024.

Attribution: Reuters