Chinese financial institutions (FIs) and non-financial corporations (NFCs) issued more than $200 billion of debt in the second quarter, more than double the typical level of quarterly issuance in the past two years, according to a Moody's Investors Service research.
As a result, debt issuance by private-sector institutions in emerging markets including China increased to its highest level on record in Q2, at $342 billion.
Moreover, the share of issuance in emerging markets increased to 31% of global issuance. Global primary issuance of debt securities by FIs and corporates increased strongly in the second quarter of 2014, exceeding US$1 trillion for the first time.
Emerging markets mainly accounted for this rise while issuance in advanced economies (69% of the global total in the second quarter) remained at robust levels.
Emerging markets now account for 39% of global NFC issuance, similar to these countries’ share in global GDP (around 40% according to IMF data).
In the second quarter, global issuance by NFCs reached a record high of $682 billion, boosted by a 78% increase in issuance by investment grade (IG) NFCs in emerging economies and a 62% rise in issuance by high-yield (HY) NFCs in advanced economies compared with Q1.
On a quarter-on-quarter basis, global issuance by FIs increased slightly to $404 billion in Q2 (and considerably more markedly compared with Q2 2013). However, it remained around 40% below the peak recorded prior to the global financial crisis.
After last year’s financial turbulence associated with the US Federal Reserve’s tapering of its quantitative easing policy and financial market tensions in emerging markets earlier this year, FIs and NFCs have taken advantage of the generally benign global market environment in Q2 (with low yields and low volatility) to issue debt securities.
"Stronger economic growth will generate larger financing needs, part of which will be met by issuance of new debt securities, which will likely provide sustained support to the upward trend in the share of emerging markets in global corporate issuance," says Moody's.