The comeback of oversubscribed high yield deals in the Asian capital and dollar markets in the past week has indicated that the Asian private banking overinflated bid has returned to the markets.
The booking of US$5.4 billion for a US$800 million transaction of San Miguel Corporation is the latest example of this overinflation. The biggest on record though is the 22 billion renminbi or US$3.56 billion booked demand for Chinese developer Kaisa when the bond was just for 1.8 billion yuan only.
There is an irony in these deals, as banks and high yield issue owners are celebrating the success of the deals while institutional investors prepare for the resulting market dislocations resulting from oversubscription.
Taking as an example the San Miguel deal. When the bonds issued were traded down to secondary, the last quote provided was between 99.00 to 99.75 when it was originally priced at par value. There was no surprise here, as nearly 49% of the bonds subscribed went to private dealers' accounts.
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