Global demand jumps for emerging Asia bonds on rate-cut bets, FX
[HONG KONG] Global investors are extending their purchases of sovereign bonds in emerging Asia on rate-cut wagers and stronger local currencies.
Foreign funds bought US$2.9 billion in Malaysia conventional government bonds in May, according to Bank Negara Malaysia's latest data, the largest monthly inflow since October 2013. Their purchase of a net US$652 million of listed bonds in South Korea on Jun 5, marked the longest buying streak in more than two years, according to Financial Supervisory Service data.
The inflows came as most emerging-Asian currencies strengthened this quarter, buoyed by an extended decline in the US dollar due to waning US exceptionalism and de-US dollarisation concerns. Growing expectations of lower borrowing costs in the region are also aiding bond sales, with issuers racing to secure financing ahead of any further wobbles in global markets.
Traders are increasingly betting that Malaysia, South-east Asia's last holdout against interest rate cuts, will finally pivot to boost its economic growth amid trade uncertainties. The Bank of Korea cut benchmark rates by 25 basis points at May-end, while signalling more policy easing as US trade tariffs hit growth.
Global investors have also poured US$1.7 billion and US$2.1 billion, respectively, into Thailand and Indonesian bonds since April, putting them on track for their largest inflows in at least three quarters. The demand has driven sovereign yields lower, with Thailand's 10-year benchmark falling to the lowest in nearly four years, while the similar Indonesia note is hovering close to a low in November.
In South Korea, clarity over the political landscape is also lifting the prospect for the country's assets after months of leadership vacuum. This, in tandem with the forthcoming addition into FTSE Russell's World government Bond Index are buoying demand despite lingering concerns over additional debt supply to fund President Lee Jae-myung's fiscal spending plans.
The benchmark Kospi Index climbed almost 2 per cent on Monday (Jun 9), leading gains in Asia, while Malaysia's main stock index rose by as much as 0.3 per cent. Global trade optimism was buoyed on Monday as top trade officials from US and China are set to hold fresh talks in London. BLOOMBERG
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Straits Times
23 minutes ago
- Straits Times
Indonesia expels 4 miners from Raja Ampat, lets one company stay
PT Gag Nikel is the fifth firm implicated and was allowed to continue operations. Its mining site is on the 6,000 ha Gag island. PHOTO: REUTERS Indonesia revokes licences of four nickel miners in Raja Ampat, allows one to continue - The Indonesian government has revoked the business licences of four nickel mining companies operating on the small islands within Raja Ampat, a Unesco site, for breaches related to a permit regulating forest use – it is the latest response to the discovery of illegal works in the country. However, calls from the international environmental community for a full ban on mining activities in the world-renowned marine biodiversity site still persist. On June 10, energy and mineral resources minister Bahlil Lahadalia told reporters after a meeting with President Prabowo Subianto that the four firms in question were all in the first steps of operations, namely the exploration stage that involves identifying potential areas of nickel deposits. Meanwhile, a fifth company, which is being looked into, has started production – this process involves concentrating, smelting and refining the nickel. It has been allowed to continue but is subject to strict monitoring from the government, said Mr Bahlil. Waste water management systems and air pollution are monitored, among other things. Apart from these five companies, there are other existing mining companies operating in Raja Ampat. Indonesia's 2014 coastal areas and small islands management law prohibits mining activities in islands of 2,000 sq km or smaller, like those in Raja Ampat. However, firms that meet certain austere requirements, including being able to give strong assurance that they will not affect the sea ecosystem, mangroves, reefs or any conservation areas, can be issued licences to carry out mining activities. The four companies whose licences were revoked are PT Anugerah Surya Pratama, PT Kawei Sejahtera Mining, PT Mulia Raymond Perkasa, and PT Nurham, said Mr Bahlil. The investigations and breaches were related to the Forest Area Utilisation Approvals, also known as PPKH permits. During the June 10 press conference, Mr Bahlil did not address questions related to why these firms were granted permits to operate in Raja Ampat. Besides a mining business permit, firms need a PPKH permit, which, among its terms, allows miners to use allocated areas of forest and also requires that they must later replant the forest area they operate in. China investor-owned PT Anugerah Surya Pratama, whose site is in the 746 ha Manuran island, allegedly operated without the required environmental management and waste water management systems. PT Kawei Sejahtera Mining, allegedly operated in a forest area beyond the area it was allowed to operate in under its PPKH permit. PT Mulia Raymond Perkasa did not possess a PPKH permit. PT Gag Nikel is the fifth firm implicated and was allowed to continue operations. Its mining site is on the 6,000 ha Gag island. The firm, a subsidiary of state-controlled mining company Aneka Tambang, was told on June 5 to halt mining temporarily amid public pressure. After the press conference, it can restart operations immediately. The decision to allow PT Gag Nikel to continue operations was made based on consultation with all stakeholders including the local community leaders, said Mr Bahlil on June 10, adding: 'President Prabowo has paid special attention to Raja Ampat and exerts serious efforts to keep Raja Ampat a world tourism spot.' Papuans holding placards, reading 'mining must fall', 'stop destroying our beloved homeland', and 'resist all forms of state policies that exploit Papua's natural resources and people', during a protest march in Sorong on June 10. PHOTO: AFP Environmental experts told The Straits Times that a total ban on mining activities on the Raja Ampat islets is the only way forward to protect the popular diving and ecotourism spot located in West Papua. Should any extractive activities continue, it could result in the extinction of the area's flora and fauna. Raja Ampat , a Unesco Global Geopark site consisting of over 1,500 islets, is one of Indonesia's top destinations for diving and ecotourism . It is internationally recognised as part of the Coral Triangle that home to more than 500 species of coral and more than 1,400 species of fish . As a Unesco Global Geopark, it has to abide by certain regulations including conserving nature and maintaining sustainable tourism. The Coral Triangle is a global epicentre for marine biodiversity and encompasses the tropical waters around Indonesia, Malaysia, the Philippines, Timor-Leste, Papua New Guinea and Solomon Islands. 'We appreciate President Prabowo Subianto's firm act to shut those companies' operations, but more should be done,' Dr Fahmy Radhi, an energy economist at the University of Gadjah Mada and a former adviser to a minister, told The Straits Times. All mining should be banned in Raja Ampat, with no exceptions, he added, saying: 'Any mining anywhere produces environmental pollution. In Raja Ampat, there is so much at stake – natural forest, very rare flora and fauna.' Raja Ampat, a Unesco Global Geopark site consisting of over 1,500 islets, is one of Indonesia's top destinations for diving and ecotourism. PHOTO: AFP Greenpeace had earlier sounded the alarm on these illegal nickel mining activities when it released a June 3 report and videos highlighting the alleged violations against environmental regulations in the islets within Raja Ampat district including the Gag, Kawe and Manuran islands. Citing the report , Greenpeace forest campaigner Iqbal Damanik said the nickel exploitation in these islands has destroyed more than 500 ha of forest and vegetation. The exploitation has also caused sediment accumulation along the coastline of the small islands, which could potentially hurt coral reef and the Raja Ampat sea ecosystem. Maritime affairs expert Marcellus Hakeng Jayawibawa warned that if this issue is not addressed promptly, Raja Ampat could lose its Unesco Global Geopark status. The islets where these mining activities occurred are between 30km to 40km away from the Karst of Piaynemo, one of the most popular geological heritage spots within Raja Ampat. Raja Ampat is internationally recognised as part of the Coral Triangle that home to more than 500 species of coral and more than 1,400 species of fish. PHOTO: AFP During a June 5 visit to some of the affected islands, Mr Bahlil had said that the mining activities were 'quite a distance away'. 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The Raja Ampat mining violations have sparked a wave of outcry on social media, with one video featuring young boys making impassioned pleas to the government. PHOTO: EMELDAPUTRI22/INSTAGRAM A video that has made the rounds features several young boys , against the backdrop of Raja Ampat, making impassioned pleas to the government. One of them says: '(When) I was little, I swam in crystal-clear seawater and listened to the cheerful chirping of birds. 'Now, the earth is scarred, the sea has turned murky brown, and the birds' songs are slowly fading. All of this is sacrificed for mining and money.' Wahyudi Soeriaatmadja has been Indonesia correspondent at The Straits Times since 2008, and is based in Jakarta. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
28 minutes ago
- Business Times
Tencent Music to buy Chinese audio platform Ximalaya for US$2.4 billion
[BEIJING] Chinese music platform Tencent Music Entertainment Group said on Tuesday (Jun 10) it would buy long-form audio platform Ximalaya for about US$2.4 billion in cash and stock, expanding its library of content to attract more paying users. US-listed shares of Tencent rose 7 per cent in premarket trading. The company will offer US$1.26 billion in cash and Class A shares representing up to 5.20 per cent of its total outstanding stock. It will also issue shares to Ximalaya's founder investors not exceeding 0.37 per cent of its total share count. The stock component of the deal totals about US$1.15 billion based on Tencent Music's last closing price on April 24. Closely held Ximalaya counts Tencent, Baidu and Sony Group's music entertainment unit as backers. The company filed for a Hong Kong initial public offering in 2021, but pushed back the plan. The app-based online audio platform had 303 million monthly active users as of 2023, according to a separate listing application it filed last year. Tencent Music is one of the biggest online music entertainment platforms in China, with apps such as QQ Music, Kugou, Kuwo and WeSing, according to its website. REUTERS, BLOOMBERG
Business Times
an hour ago
- Business Times
Private-capital funds: Depressed distributions with no end in sight
AFTER a bacchanal of deal activity lasting into 2021, private-market participants are still nursing a hangover. Assets acquired at premium valuations at the market peak have been creating headaches for general partners (GPs), who must decide whether to hold out for buyers at current valuations or stomach write-downs for a shot at quick liquidity. Net asset value (NAV) is increasingly bottled up in old funds that should otherwise be liquidating. For now, it seems only top-shelf assets are finding buyers, while assets with weaker fundamentals are still on ice. In this column, we take a sober look at how private-capital markets are adjusting to a world of depressed distributions, with no exits in sight. Limited partners (LPs), hoping for an outpouring of liquidity in 2025, may instead want to brace themselves for another dry year. Recent vintages falling further behind Private-capital distributions remain subdued, extending a slowdown that began in the wake of 2021's exit boom. What once looked like a brief pause increasingly feels like a prolonged holding pattern and a test of patience for LPs. This slowdown is especially apparent in the divergence of the net-cash-flow paths between vintage cohorts. While cash flows for most historical vintages follow remarkably similar paths, recent vintages are drifting from the script. The traditional cadence of investment, ramp-up and harvest appears to be slipping out of rhythm. In some cases, as with the 2015-2017 vintages, this slowdown looks like mean reversion, dragging these vintages back down after a period of unusually strong liquidity – particularly in venture capital and buyout. In others, like the 2018-2020 vintages, the drop appears more acute, suggesting not just a return to historical norms but also a deeper pullback in realisations. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Structural shifts may be reinforcing the deviations from long-run averages. Strategy evolution in areas such as private credit, shifting exit dynamics in buyouts, and a valuation overhang in venture and real estate all suggest that today's market environment is markedly different from past cycles. Historical analogues are becoming less-reliable guides. But the message is clear: Recent vintages aren't just behind the curve – they're navigating a new course. Water everywhere, but not a drop to drink Across private-capital strategies, NAVs in old funds (those that have outlived the average liquidation age of their asset class) are at or near record levels, reaching US$250 billion in the fourth quarter of 2024, according to data from the MSCI Private Capital Universe. For LPs anticipating liquidity from their more mature private-equity (PE) commitments, some unwelcome news: This rise in late-life NAV is largely attributable to distribution rates, which have fallen to record lows, rather than to strong growth. PE distribution rates remain depressed, with specific implications for funds that are over the hill. The dearth of distributions is bottling up assets that were once reliable candidates for exits. This has meant fund lives that drag on longer than expected, and LPs are increasingly looking to more mature corners of their portfolios for liquidity. The same can't be said for private credit and private real estate. In the former, the self-liquidating nature of loans has stabilised distributions and kept NAVs in check through funds' golden years. For the latter, write-downs kept a lid on valuations coming out of 2020, even as transaction activity remained depressed. For PE distribution rates to revert to historical norms and old NAVs to run off, there are two options: one hopeful, one not. In the optimistic scenario, deal activity recovers and a wave of exits provides some much-needed liquidity. In the other, GPs come to believe that many of these long-held assets are overvalued and accept write-downs as the cost of winding down a fund, as we've seen in real estate. Tempering cash-flow expectations Across PE and private real estate, distribution rates are near historic lows, and recent market volatility may put cash flows under further pressure when we start to see data for 2025. Historically, prolonged downturns in public-equity markets have been reflected in private-capital distributions. The dotcom bust and 2008 global financial crisis both hit distributions hard; but in recent years, distributions have remained depressed despite a rebound in public equities. For LPs counting on distributions to fund capital calls from other private commitments, this combination of public-equity sell-offs and falling distribution rates presents a challenge: if forced to sell liquid assets to meet capital calls, it's likely to be when prices are down. Private credit, in contrast, has continued to distribute more or less apace, benefiting from elevated interest rates passing through to lenders. This cash-flow diversification may become an increasingly important benefit of private-credit allocations. Not everything is rosy in private credit, however. GPs are increasingly writing down loan values as borrowers struggle under the weight of persistently high interest rates and new-found uncertainty around the economy's trajectory. Valuation multiples in free fall may call for an Ebitda parachute Between 2022 and 2024, buyout exits were sold at lower median-valuation multiples than assets still held in portfolios – an inversion from historical norms – despite exhibiting stronger margin growth and lower leverage. In contrast, held assets, carried at higher multiples, are grappling with contracting profitability and rising leverage, raising questions about valuations and their paths to exit. These questions are amplified by the macro backdrop: sticky inflation risk, higher-for-longer interest rates and growth uncertainty that could tip into stagflation. Held assets confront these macro headwinds with little balance-sheet cushion, given their narrowing-since-entry margins and rising leverage. Over the past decade, exited assets have consistently exhibited stronger median Ebitda (earnings before interest, tax, depreciation, and amortisation) margin growth since their entry and more contained median net-debt-to-Ebitda ratios than held assets, which reflect GPs' tendency to prioritise exiting higher-performing assets. This selection trend proved especially relevant between 2022 and 2024, as exited assets' robust fundamentals cushioned the impact of falling valuations. In 2025, with multiples under pressure and rising macro uncertainty, strong fundamentals may be the last line of defence against deeper erosion in exit proceeds and more strain on LPs. Is the party over? Recent vintages of private-capital funds have plenty of ground to cover if they're going to catch up with their older peers' cash-flow patterns, and the surprising volatility in public markets of early 2025 is unlikely to help them close the gap. Returns for older private-equity funds have been flat, but more assets are accumulating in funds that are struggling to liquidate their holdings. GPs are preferentially exiting portfolio companies with strong fundamentals, leaving an unclear path for selling those remaining assets. LPs who were hoping for a rebound in transaction activity, and thus liquidity, in 2025 may need to adjust their plans. The writers are vice-presidents, MSCI Private Capital Research. Written with the assistance of Uday Karri, vice-president, and Daniel Hadley, senior associate.
