HONG KONG: Big spending Asian utilities and oil companies are rushing to sell bonds on expectations that interest rates will rise later this year.
Energy firms from South Korea to Indonesia want to raise billions of dollars to expand and raise output to meet soaring energy demand from the region's booming economies.
“They want to get their financing done as cheaply as possible and ahead of an interest rate hike. Obviously, this is the right time to do it,” said Fai Auyeung, managing director and head of Asia power banking group at JP Morgan.
Utilities including natural gas distribution firms are especially active. They have issued US$1.46bil worth of global bonds so far this year, surpassing US$955mil in 2003 and half of 2002's US$2.89bil, according to research firm Dealogic.
The borrowing appetite of Asia's oil and gas explorers and producers, oil service companies, pipeline operators and refiners is not as strong because they are enjoying high crude oil prices. Only one gas firm, Indonesia's PGN, sold a US$125mil euro bond this year.
Asia's oil and gas companies borrowed US$3bil last year and US$4.3bil in 2002, most of which was issued by Malaysia's Petroliam Nasional Bhd (Petronas), Asia's most acquisitive oil company, Dealogic said.
But analysts say that Petronas and CNOOC Ltd, China's largest offshore oil producer, are likely to borrow heavily in the months ahead to finance overseas acquisitions to boost output.
“I would envisage they would need to be a little bit more aggressive on their balance sheet going forward,” said Marcus Weston, a fixed income analyst at HSBC.
Issuance is likely to cool towards the end of 2004.
“You will probably see sort of a slowdown because a lot of the issuers will have actually gone to market earlier just to take advantage of the current low interest rate environment,” said a senior analyst at a Western bank. – Reuters
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