EMERGING corporate bond funds searching for debt to buy up in the absence of Russian and Brazilian borrowers have found themselves jostling with a growing number of cash-rich Asian investors for new issues from the region.

    Bonds from Asian companies, largely Chinese, are dominating the new U.S. dollar issue market now that once-prolific Russian and Latin American borrowers have been shut out by Western sanctions on Moscow, a corruption scandal at Brazil’s biggest company Petrobras, weaker commodity prices and fears of a default in Venezuela.

    Asian companies have stepped in to fill the void, accounting for almost 60 percent of this year’s emerging corporate bond sales, having raised US$70 billion as of the end of April, according to BNP Paribas. That’s up from a 51 percent share last year and a meagre 17 percent in 2008, BNP says.

    So far so good. But Asia’s swelling pension and mutual fund industries have also created a huge new demand base at home, elbowing out the Western funds.

    Greg Saichin, head of emerging debt at Allianz Global Investors, estimated that 60 to 70 percent of the average new issue in Asia is snapped up by locals.

    “Some years ago the syndicates would come to Europe and the United States peddling these bonds and no broker would ever close the book before people in these latitudes had a look,” he said.

    “Right now, my feel is whatever is left of Asian issues for outside investors is between 20-30 percent — tops.”

    Allocations in some recent cases were filled almost entirely within Asia. For instance last week, China Construction Bank took orders of US$7 billion for a US$2 billion bond, 88 percent of them from local buyers.

    Chinese Times Property’s US$280 million deal in March came from an overflowing book worth US$1 billion, with 90 percent of the bids from Asia.

    These volumes have lifted Asia’s weight with bond investors, with China toppling Brazil as the biggest component of the CEMBI Broad and Diversified indexes, the benchmark for most investors in emerging company debt.

    “If you are not effectively on the ball with eyes on the book, by noon you will have missed the bus,” Saichin said

    To compete with local buyers, more and more funds, including his own, are opening offices in the region, he said.(SD-Agencies)