Market Research Report : Corporate bond market in china 2012

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Corporate Bond market is one of the fastest growing segments of the financial sector in China.

The report begins with a brief introduction on the various segments of the bond market in China followed by a further split of corporate bond segments. Evolution of the corporate bond market in China entails a brief description of the major events that have taken place since its inception. The market overview section provides an overview of the global corporate bond market in terms of issuance of corporate bonds and corporate bonds outstanding. This section also includes a snapshot of the corporate bond market in China covering the market size with forecast figures between 2009 and 2015. The section also provides information about the investor profiles of the corporate bond market in China.

Furthermore, the report delves into the credit spread between corporate bonds yield and benchmark government bonds yield spanning between various investment grades and tenor.

Key drivers of the industry explain the factors influencing the growth of the corporate bond market in China in detail. Some of them include growing economy of China, corporate bond market reforms and product innovation.

Major challenges that could impede the development and growth of the Chinese corporate bond market include inadequate credit rating system, impact of securitization, inadequate information disclosure and underdeveloped secondary bond market.

The government initiatives section includes a detailed description of the steps to be taken by the government of China in view of developing the corporate bond market under its 12th five year plan. This section also covers the major regulators of the corporate bond market alongwith key steps to be taken by them for the purpose of developing the corporate bond market in China.

Key emerging trends that are of marked importance to the corporate bond market in China include foreign participation and rise in market liquidity.

The report contains a brief analysis on the competitive landscape of the corporate bond market in China. This section provides a three dimensional analysis of the key corporate bond issuers’ revenues, profits and market capitalization followed by a ranking of companies based on the issuance volume of corporate bonds in China. The report also features brief profiles of the key corporate bond issuers in the market along with a snapshot of their corporation, financial performance and business highlights thus providing an insight into the existing competitive scenario.

Some of the key statistics or factors impacting the corporate bond market in China covered in the report include, global market size, global corporate bond issuance, domestic market size, corporate bond investor profile, local currency credit spread, growing GDP of the Chinese economy, share of medium term notes (MTN) in total corporate bond issuance, corporate bo

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Market Research Report : Corporate bond market in china 2012

  1. 1. Corporate Bond Market – ChinaFebruary 2012
  2. 2. Executive Summary Global corporate bond market rose to USD x tr in 20-- from USD y tr in 20-- Corporate bond market in China is expected to grow with a GAGR of z% to USD y bn in 20-- from Market USD x bn in 20-- A and B dominate the share of investments in corporate bonds Drivers: Challenges: LE Drivers & Low Market Penetration • Inadequate Credit Rating System Reforms in Issuance Mechanism • Impact of SecuritizationChallenges Product Innovation MP • • Inadequate Information Disclosure Underdeveloped Secondary Bond MarketGovernment Initiatives SA Structural reforms under the 12th Five Year Plan Supervisory Focus of NAFMII Corporate Bond Market Reforms and Regulations Offshore Investors Allowed Access to Interbank Market Foreign Participation Trends Rise in Market Liquidity Major Corporate Bond IssuersCompetition Issuer 1 Issuer 2 Issuer 3 Issuer 4 Issuer 5 Issuer 6 CORPORATE BOND MARKET IN CHINA 2012.PPT 2
  3. 3. •Introduction•Market Overview • Global LE • China P•Drivers & Challenges M SA•Credit Spread•Government Initiatives•Key Trends•Key Bond Issuers•Key Takeaway CORPORATE BOND MARKET IN CHINA 2012.PPT 3
  4. 4. China’s Corporate Bond Market is divided into various segments Bond Market A B PLE Y Z M X SA Corporate Bonds P Q R S T U Issued a b c d e f bySource: CORPORATE BOND MARKET IN CHINA 2012.PPT 4
  5. 5. Corporate Bond Market in China – Evolution • Hhh • Iii Year b Year c PLE Year d Year f Year h M Year a Year g • Aaa • Bbb • Ccc SA • Ddd • Eee • Fff • Ggg • JjjSource: Note: CORPORATE BOND MARKET IN CHINA 2012.PPT 5
  6. 6. Global corporate bond market grew with a CAGR of X% between 20-- and 20--reaching USD Y trillion Global Corporate Bond Market – Overview Corporate Debt Outstanding • Corporate bonds are gradually emerging as a major tr 200 sector of the global bond market A B C 150 e1 e2 e3 d3 d1 d2 c2 c3 • Global corporate bonds outstanding in 20-- was 100 c1 LE b1 b2 b3 50 worth USD x billion a1 a2 a3 0 P • Issuance of corporate bonds registered more than y% M increase from 20-- amounting to USD z bn in 20-- 20-- A B 20-- C D E 20-- the corporate bond market growth SA • Developed economies accounted for the majority of • Emerging markets accounted for a% of the total Corporate Bonds Issuance USD bn 1,400 X x2 issuance of corporate bonds in 20-- from b% in 20-- 1,200 1,000 x1 800 600 400 200 0 20-- 20--Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 6
  7. 7. Corporate bond market in China is forecasted to witness strong growth through 20-- Corporate Bond Market – Overview Market Size and Growth • Corporate bond market is expected to grow with a USD bn CAGR of X% between 20-- and 20-- reaching USD y bn 3,000 x3 • GDP of the economy is expected to grow from USD x X% bn in 20-- to USD y bn in 2015 2,000 LE • Corporate bonds accounted for y% and x% of GDP in 1,000 x2 20-- and 20-- respectively and it is expected to grow x1 to z% of GDP by 20-- • In 20--, out of the x biggest corporate bond sales in Asia y were Chinese companies MP 0 20-- 20-- 20--e • In 20--, y of the top x bond issuers were Z • Supportive government policies have also SA • State owned companies are the major issuers of the corporate bonds in China Corporate Bonds - Investor Profile 100 % e1 d1 e2 d2 contributed to the growth of the corporate bond 80 c1 c2 100% market in China 60 b1 b2 • Among investor profiles, A remain the largest holders 40 of corporate bonds with a share of x% as of June 20-- a1 a2 20 0 20-- 20-- A B C D ESource: CORPORATE BOND MARKET IN CHINA 2012.PPT 7
  8. 8. Drivers & Challenges – Summary Challenges LE Inadequate Credit Rating System Drivers Low Market Penetration MP Impact of Securitization Reforms in Issuance Mechanism Product Innovation SA Inadequate Information Disclosure Underdeveloped Secondary Bond Market CORPORATE BOND MARKET IN CHINA 2012.PPT 8
  9. 9. Growth in GDP of the Chinese economy presents a greater opportunity for corporate bond market growth Growing Chinese Economy Impact •Finding 1 •Finding 2 •Finding 3 •Finding 4 PLE USD bn Growth in GDP of China SAM % Corporate Bond GDP Share (20--) 12,000 x3 120 c1 X% 10,000 100 8,000 80 x2 6,000 x1 60 4,000 40 b1 2,000 20 a1 0 0 20-- 20-- 20--e Country 1 Country 2 Country 3Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 9
  10. 10. Reforms in issuance mechanism of corporate bonds paves way for increasing issuance of bonds Reforms in Issuance Mechanism Impact • Finding 1 • Finding 2 • Finding 3 • Finding 4 LE • Finding 5 • Finding 6 MP SA Local Currency Corporate Bond Issuance USD bn Y% 300 x3 x4 200 x2 100 x1 0 20-- 20-- 20-- 20--Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 10
  11. 11. Product Innovation in the form of medium term loans led to rapid growth of corporate bond market Product Innovation Impact •Finding 1 •Finding 2 •Finding 3 LE •Finding 4 MP MTN- Share of Corporate Bond Issuance % Aaa SA Issuance Volume of MTN - 2009 a1 A E B F 60 C G y2 b1 y3 D H 40 y1 h1 20 c1 d1 0 e1 20-- 20-- 20-- g1 f1Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 11
  12. 12. Absence of proper credit rating system acts as a hindrance to the development of corporate bond market Inadequate Credit Rating System Impact • Finding 1 • Finding 2 • Finding 3 • Finding 4 PLE Classification Rating AM Rating of Long Term Corporate Bonds S Credit Solvency Risk X YSource: CORPORATE BOND MARKET IN CHINA 2012.PPT 12
  13. 13. Summary – Trends PLE SAM Foreign Rise in Market Participation Trends Liquidity CORPORATE BOND MARKET IN CHINA 2012.PPT 13
  14. 14. Growth in the corporate bond market is enhanced by improvement in market liquidity Rise in Market Liquidity • Finding 1 Improvement in market liquidity • Finding 2 enhances the • Finding 3 trading activity of corporate bonds LE • Finding 4 MP 800 USD bn S x3 A Corporate Bond Trading Volume Corporate Bond Turnover Ratio Absolute 2.0 X% a2 a3 a4 600 1.5 x2 a1 400 1.0 x1 200 0.5 0 0.0 20-- 20-- 20-- 20-- 20-- 20-- 20--Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 14
  15. 15. Ranking – Top Corporate Bond Issuers Top 30 Companies – In Terms of Bond Issuance Top 30 Players – In Terms of Bond Issuance (March 20--) Rank Bond Issuer Rank Company Name 1 Issuer 1 16 Issuer 16 LE 2 Issuer 2 17 Issuer 17 P 3 Issuer 3 18 Issuer 18 4 Issuer 4 19 Issuer 19 5 6 7 Issuer 5 Issuer 6 Issuer 7 SAM 20 21 22 Issuer 20 Issuer 21 Issuer 22 8 Issuer 8 23 Issuer 23 9 Issuer 9 24 Issuer 24 10 Issuer 10 25 Issuer 25 11 Issuer 11 26 Issuer 26 12 Issuer 12 27 Issuer 27 13 Issuer 13 28 Issuer 28 14 Issuer 14 29 Issuer 29 15 Issuer 15 30 Issuer 30Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 15
  16. 16. Major Domestic Corporate Bond Issuers – Financial Health Summary (1/2) Net Income Size of the Bubble represents Market Capitalization 30 28 26 a 24 22 g LE b 20 P 18 16 c d M 14 A 12 h S 10 8 6 4 e 2 0 f -2 Revenue 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280 290 300 310 320 330 Issuer 1 Issuer 3 Issuer 5 Issuer 7 Issuer 2 Issuer 4 Issuer 6 Issuer 8Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 16
  17. 17. Domestic Corporate Bond Issuers – Summary (2/2) Major 10 companies – Bond Issuance 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 USD bn Issuer 1 x1 LE Issuer 2 x2 Issuer 3 Issuer 4 MP x3 x4 Issuer 5 Issuer 6 Issuer 7 SA x7 x5 x6 Issuer 8 x8 Issuer 9 x9 Issuer10 x10Source: CORPORATE BOND MARKET IN CHINA 2012.PPT 17
  18. 18. Major Domestic Players in the Market (1/18) Company Snapshot: Issuer 1 Corporate Information Financial Performance Revenue Headquarters City 1, Country 1 Revenue Profit USD mn Profit / Loss USD mn 20,000 x4 2,000 Founded 20-- LE x1 1,500 15,000 x2 x3 1,000 Products Product 1, Product 2, Product 3 Key People Person 1 - Designation MP 10,000 5,000 500 0 -500 A 0 -1,000 S 20-- 20-- 20-- 20-- Business Highlights • Company engages in the production and distribution of metal materials, sale of general machinery and equipment, of nonferrous metals and electricity • Sales of the company amounted to USD x bn in 20-- and the total assets of the company amounted to USD y bn • Long term corporate bonds amounting to USD y bn was issued by the company in 20-- • Proceeds from the issuance of bonds will be utilized by the company to optimize the debt structure and raise funds fir the working capitalSource: CORPORATE BOND MARKET IN CHINA 2012.PPT 18
  19. 19. Corporate bond market in China is poised to realizesignificant growth through 20-- Corporate Bond market of China is expected to grow at a CAGR of X% between 20-- and 20-- Opportunities in the Government Market Size Market Initiatives USD bn Rise in issuance of 12th Five Year Plan of LE 3,000 x3 corporate bonds the government X% P following issuance focuses on measures 2,000 reform gave a major to boost the M boost to the corporate corporate bond 1,000 x2 A bond market x1 market Product innovation in form of medium term notes is expected to set the growth path of the 0 S 20-- 20-- 20--e NAFMII, CBRC and CIRC have taken numerous initiatives to develop the corporate bond market in corporate bond China Challenges market in China Rise in both liquidity and • Inadequate Credit Rating System In order to develop foreign participation will the market offshore, • Inadequate Information Disclosure lead to an expansion of investors are allowed the corporate bond • Underdeveloped Secondary Bond Market to issue bonds in the market in China Interbank market CORPORATE BOND MARKET IN CHINA 2012.PPT 19
  20. 20. Thank you for the attentionCorporate Bond Market - China report is a part of Netscribes’ Financial Services Industry Series.For more detailed information or customized research requirements please contact: Jitendra Punjabi Phone: +91 33 4064 6215 E-Mail: jitendra.punjabi@netscribes.comAbout NetscribesNetscribes is a knowledge-consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment &business research, business & corporate intelligence, content-management services, and knowledge-software services. At its core lies a truevalue proposition that draws upon a vast knowledge base. Netscribes is a one-stop shop designed to fulfil clients’ profitability and growthobjectives.Disclaimer: This report is published for general information only. Although high standards have been used the preparation, Research on India,Netscribes (India) Pvt. Ltd. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is thesole property of Netscribes (India) Pvt. Ltd. and prior permission is required for guidelines on reproduction. CORPORATE BOND MARKET IN CHINA 2012.PPT 20

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