Date post: | 20-Jan-2016 |
Category: |
Documents |
Upload: | hilary-lee |
View: | 233 times |
Download: | 7 times |
Potential of foreign investments into domestic
corporate bonds market
Zoya A. Lebedeva, Ph.D.Head of Financial
Engineering Department,
“EUROFINANSY” Investment Banking,
Key market indicators
Stable and rapid enlargement of market scales Boost in volumes of raised funds Significant excess of indicators of placements over those of redemptions
Placements and redemptions of bonds
0
10
20
30
40
50
60
II Q1999
III Q1999
IV Q1999
I Q2000
II Q2000
III Q2000
IV Q2000
I Q2001
II Q2001
III Q2001
IV Q2001
I Q2002
II Q2002
III Q2002
IV Q2002
I Q2003
II Q2003
III Q2003
IV Q2003
I Q2004
II Q2004
III Q2004
IV Q2004
I Q2005
II Q2005
III Q2004
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
placed, number of issues redeemed, number of issues
placed, thousand USD redeemed, thousand USD
Key market indicators
Dramatic rise in capacity during 2004 – 2005 Outstripping growth of non-financial sector issues
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
14 000 000
01.07.99 01.07.00 01.07.01 01.07.02 01.07.03 01.07.04 01.07.05
Market capacity
Market capacity of non-financial organisations, thousand USDMarket capacity of financial organisations, thousand USD
Key market indicators
Trends similar to changes in capacity Expansion of market instruments range Outstripping growth of non-financial sector issues
0
50
100
150
200
250
300
01.07.99 01.07.00 01.07.01 01.07.02 01.07.03 01.07.04 01.07.05
Number of traded issues
Number of traded issues of non-financial organisationsNumber of traded issues of financial organisations
Term structure of market (volumes of borrowings)
Progressive increase in value of issues with term of 1-3 years and sharp decrease in share in 2005
Significant rise in share of long-term issues as of 9 months of 2005 Low value of short-term issues
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
1999 2000 2001 2002 2003 2004 2005
Term structure of issues, thousand USD
less than 1 y ear f rom 1 y ear to 3 y ears more than 3 y ears
Term structure of market (number of issues)
Stable number of midterm issues in 2002 – 2005 Sharp fall in number and share of short-term issues, played substantial
role during 2000 – 2002 Rise in number and share of long-term issues
0102030405060708090
100
1999 2000 2001 2002 2003 2004 2005
Term structure of issues, number of registered issues
less than 1 y ear f rom 1 y ear to 3 y ears more than 3 y ears
Term structure of market (number of issues)
Stable aggregate volumes of mid-sized issues during 2002 – 2005 Rise in aggregate volumes and share of large issues Low volumes of small issues
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
1999 2000 2001 2002 2003 2004 2005
Structure of issues on volumes, thousand USD
more than1 000 mln.RUR
from 301to 1 000mln. RUR
less than300 mln.RUR
Market structure on volumes of borrowings (number of issues)
Stable number and share of mid-sized issues in 2003 – 2005 Sharp decrease in number and share of small issues played significant
role in 2000 – 2002 Rise in number and share of large issues
0102030405060708090
100
1999 2000 2001 2002 2003 2004 2005
Structure of issues on volumes, number of registered issues
more than1 000 mln.RUR
from 301 to1 000 mln.RUR
less than300 mln.RUR
Industrial structure of market (volumes of borrowings)
Decrease in concentration of resources attracted into leading industry
Enlargement of issuers’ industrial structure Growth of share of non-financial sector in terms of value
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
1999 2000 2001 2002 2003 2004 2005
Industrial structure of market, thousand USD
Mining Machinery construction MetallurgyOil and gas Food industry ConstructionTelecom Transport Pow er engineeringOthers Financial companies
Market structure on volumes of borrowings (number of issues)
Growth in share of companies that don’t refer to telecom, power engineering and mining sectors;
Rise in sector of companies of other industries - additional evidence of industrial structure enlargement
0102030405060708090
100
1999 2000 2001 2002 2003 2004 2005
Industrial structure of market, number of registered issues
Mining Machinery construction MetallurgyOil and gas Food industry ConstructionTelecom Transport Pow er engineeringOthers Financial companies
Innovative market - financial engineering evolution
Changes in products structure: Adjustment of issues’ parameters to
macroeconomic state of market, asymmetry in state governance, changes in structure of issuers
Evolution of issuers’ goals from guaranteed sale of the goods with significant advancing to market funds raising tied up to issuers’ interests
Essential updates in techniques of yield management.
Structure of issues - lack of variety
In fixing up terms: options put provided by issuer or third parties, incl.
accelerating covenants; redemption value amortization.
In fixing up yield rates:
step down rate bonds;
reset bonds;
options on currency and interest rates;
for limitation of payments - floor- and cap- options.
Liquidity of corporate bonds market
Boost in trade volumes Outstripping growth in volumes compared to market
capacity
Market capacity and trade volumes, thousand USD
0,00
5,00
10,00
15,00
20,00
25,00
30,00 Tradevolumes atMICEX StockExchange
Totalturnover,assessment
Marketcapacity
Main provisions of the forecast
comparability of financial innovations in Russian and foreign markets;
transformation of financial engineering goals due to market evolution;
shift of emphasis from investor’s interests (incl. in damage to interests of issuer) to those of debtor;
increase in number of instruments, hence derivative-based products of financial engineering
Corporate bonds market dynamics
increase in number of issues and decrease in growth rates of volumes of borrowings
rise in number of issues (at simple structure of borrowings) and growth in share of companies that don’t refer to telecom, power engineering and mining sectors;
dependence of industrial structure of issuers on structural shifts in economy;
application of financial engineering in construction of bond issues as one of the stages in business consolidation and capitalization growth
Terms of borrowings -risk-management
Trends: stable share of midterm bonds and enhancing share of long-term issues (issues of non-financial sector companies)Prospective instruments: amortizing notes; annuity bonds (intended for portfolio investors).
Hedging of risks: trigger bonds (incl. accelerating covenants and poisoned options); credit derivative bonds.
Creation of income – market segmentation
Midterm borrowings – simple structure: discount bonds issue; fixed coupon rate (incl. step down rate bonds), as well as determined by issuer after report registration.
Long-term borrowings (from 5 years) – risk-management and market segmentation: indexation of income and redemption value (related to interest rates and securities market indices); launch of collar-options for limitation of payments; issue of deferred payment bonds or step up coupon notes (issuer’s financial burden management); issue of to credit sensitive bonds.
Main conclusionsRussian corporate bonds market: high yield, relatively risky rapid development due to new issues and enlargement of industries evolution of financial engineering aimed at creation of range of products and implementation of risk-management
Investor opportunities: benefits from operations with junk bonds at emerging market free entrance with further repatriation of funds
Forecast of development: optimistic
Contacts
Zoya A. Lebedeva Ph.D., Head of Financial Engineering Department
OJSC «EUROFINANSY» Investment Banking
Address: 2 building 1, Paveletskaya Square Moscow 115054, Russian Federation
Tel.: (095) 545-3535
Internet: www.eufn.ru