IFC eyes Asia’s local markets

International Finance Corporation

International Finance CorporationInternational Finance Corp is looking to ramp up its presence in Asia’s local bond markets, its top client funding official for the region has said.

The private sector development arm of the World Bank Group is preparing to issue bonds in Nepali rupees, Sri Lankan rupees and Papua New Guinea kina, according to Keshav Gaur, IFC’s head of treasury client solutions for Asia, Europe, the Middle East and Africa.

Nepal has approved an offering of onshore bonds to help fund hydroelectric power and tourism projects, while Sri Lanka has granted permission for the first overseas issuance of bonds in its local currency. Another onshore offering in Papua New Guinea is on the cards, but no banks have yet been mandated for it.

“In Asia, our primary objective is the development of the primary capital markets – both onshore and offshore,” said Gaur, speaking on the sidelines of last weekend’s Asian Development Bank annual meeting at Astana in Kazakhstan.

The moves point to IFC’s greater efforts to develop Asia’s local debt markets, coming on the back of a groundbreaking global offering of Indian rupee bonds and a first partial guarantee of a domestic Indonesian rupiah issue.

The Nepal Government last month approved the issuance of IFC bonds of up to Rs50bn (US$500m) over the next five years, according to local press reports, paving the way for the World Bank arm to become the first international institution to issue debt in the country.

A similar initiative in Papua New Guinea will make IFC the first overseas issuer in the kina bond market, with the aim of creating a market for securities beyond local government debt.

In Sri Lanka, meanwhile, IFC is working on an offshore issue that will mirror a recent fundraising in neighbouring India.

The Triple A rated supranational has issued US$1bn of Indian rupee bonds in the global market since October, creating an offshore curve for the currency through offerings at tenors of three, five and seven years.

“The market has a benchmark there now for a Triple A issue, and the curve is stable at about 100bp below onshore Government of India securities at all three points,” said Gaur, who added that very few of the buyers already had exposure to Indian debt.

“We believe offshore issues are important because they can entice foreign investors into the currency without any regulatory hurdles,” Gaur said.

IFC is now preparing to roll out an onshore Indian rupee funding programme to finance local projects, with approval to issue up to US$2.5bn of domestic bonds over time.

“As those offshore buyers get more comfortable and see the yield is 100bp sweeter onshore, we hope they will look to get licences to participate in the local market,” said Gaur.

Source : IFRAsia