“The action in Asia is very much on the investor side,” says Stephen Williams, head of IBF at HSBC. “Just about every deal that comes to the market is Asia-focused, mainly at the retail sector. They’re very attracted to the product for yield reasons and hence tend to price hybrid debt more aggressively versus senior debt than the institutional investor base.”
Asia’s institutional investors are indeed discerning; they demand the comfort of step-up structures absent on many of the retail-focused issues to provide the security against issues being called, and thus yield the necessary returns.
Absent from hybrids
Asian issuers have so far been absent from the hybrid market, save for the region’s banks, where regulators have permitted anything between 10% and 15% of tier 1 capital to be issued in hybrid securities. That has already led to bank hybrid deals in most of Asia’s key markets.
“It makes sense for any bank to do this where regulators allow,” says Jon Pratt, head of Asia debt capital markets at Credit Suisse. “It basically counts as very cheap equity.”
| “It makes sense for any bank to do this where regulators allow. |