SOUTHEAST Asian companies are on track for an eighth straight year of record bond sales as local investors provide protection from a repeat of 1997, when the region's currencies collapsed and global banks fled.
Bond sales will rise as much as 20 per cent from last year's US$101 billion (RM312.8 billion) of local and dollar-denominated notes, according to CIMB Group Holdings Bhd, the top underwriter of domestic debt in the 10-member Association of Southeast Asian Nations (Asean).
DBS Group Holdings Ltd and Maybank Kim Eng Holdings Ltd see a repeat of last year's 48 per cent gain. PTT Global Chemical Pcl of Thailand's and PT Bank Rakyat Indonesia are lining up to sell debt.
"Asia can finance Asia now," said Clifford Lee, head of fixed income at DBS, from Singapore.
"This trend has been picking up for a couple of years but it became more obvious since last year."
The combination of higher yields, faster economic growth, and an expanding pool of wealthy investors is proving irresistible to the world's biggest fund managers.
New bond issues increased five-fold since 2000 as Asean governments transformed markets since the crisis 15 years ago, when tumbling currencies froze credit, forcing Thailand, Indonesia and South Korea to borrow more than US$110 billion from the International Monetary Fund.
The IMF says the region's five biggest economies will expand nine times faster than Germany in 2013, growing 5.5 per cent, compared with 0.6 per cent for Germany and two per cent for the US.
There were 3.37 million millionaires in the Asia-Pacific region in 2011, over in North America for the first time, according to a June report by Capgemini SA and RBC Wealth Management.
"Bonds in Southeast Asia, where economic growth and currency outlooks are both solid, have been chosen by investors, luring a good amount of inflows into the region," said Takahide Irimura, head of emerging-market research in Tokyo at Kokusai, which manages the equivalent of US$37 billion.
The total value of outstanding government and corporate bonds in the region rose to US$1.1 trillion last year from US$218 billion in 2000, according to the Asian Development Bank.
Local investors hold 88 per cent of domestic government notes in the Philippines, 85 per cent in Thailand and 73 per cent in Malaysia, its data showed.
The proportion held by investors from other Asian countries rose to 9.4 per cent in 2011 from 4.2 per cent in 2001, the figures show.
"One thing that Asia learned from the 1997-1998 financial crisis is that reliance on foreign-currency funding is toxic," said CIMB deputy chief executive officer Lee Kok Kwan.
"There is actually very little need for reliance on foreign-currency funding when the savings rate in this part of the world is so high."
Gross national savings were 49 per cent of gross domestic product in Singapore and 39 per cent in Malaysia in 2011, according to a World Bank report.
That compares with 11 per cent in the United States and 23 per cent in Germany. Most Asean nations run current-account surpluses, lifting regional foreign-exchange reserves to over US$770 billion, data shows.
"As Asia is poised to lead global growth, we expect more regional investors to emerge and demand from them will rise over time," said Maybank Kim Eng chief executive officer Tengku Zafrul Tengku Abdul Aziz said. Bloomberg