Edmund Leong, UOB’s managing director and head of group investment banking, talks with The Asset about what lies ahead for UOB, investors and Asia in 2021.
How is UOB positioning its investment banking franchise in Asia?
UOB offers a wide range of financing and advisory solutions for our clients across Singapore and our key subsidiaries in Asia. Our clients appreciate our ability to provide holistic solutions (M&A, debt/equity financing) and underwriting commitment to ensure certainty of funding when they make an acquisition bid. In addition, our local currency platform across Asean countries differentiates our funding solutions from some of our peers.
How are companies adapting to the changes in market dynamics?
Despite the pandemic’s disruption of capital markets in Q2 2020, Singapore issuers tapped the bond market for refinancing purposes, bolstering their liquidity and taking advantage of historically low interest rates. Real estate firms, financial institutions and statutory boards were the top bond issuers in Singapore last year. In the fourth quarter alone, UOB led 10 bond issuances amounting S$1.8 billion (US$1.36 billion).
In the equity capital markets, financing was raised mainly to finance acquisition and business expansion plans and shore up balance sheets. Among the mainboard listings in 2020, only two were real estate investment trusts (REITs), including the United Hampshire US REIT, which was the largest IPO last year and was led by UOB. Last year was a marked change from 2019 when mainboard IPOs were dominated by REITs.
The pandemic has sharpened the focus on sustainable financing. In what ways are companies in Asean pivoting to this new expectation?
Sustainability awareness by Asean governments and companies increased in 2020. Sustainability-themed bond issuances by corporates was up 1.8 times in 2020 compared with 2019, due to increased investor demand. Indonesia and Thailand saw increases in sustainable financing as companies tapped the bond market to finance green and renewable energy and transportation projects in line with their sustainable development goals. Sustainable loans were not limited to bond issuances. In Singapore, there was strong demand for green real estate loans and renewable solar project finance deals.
How are advisers such as UOB integrating ESG initiatives when arranging deals?
UOB seeks to assist clients to incorporate sustainability practices into their business models and operational procedures and, where possible, we integrate them into our financing products. To date, UOB has three frameworks – UOB Smart City Sustainable Finance Framework, UOB Real Estate Sustainable Finance Framework, and UOB Green Circular Economy Framework – to assist customers with sustainable financing. We also provide end-to-end solutions integrating sustainable principles into project finance transactions that we arrange, as we did for LYS Energy in Singapore and Berkeley Energy Symbior Solar in Thailand. The latter deal won The Asset’s award as Best Green Loan in Thailand.
What trends could define capital markets in 2021?
For debt fundraising, we expect strong demand in the Singapore dollar bond market in the first quarter in view of recent conducive market conditions buoyed by promising economic data and on the back of pent-up demand and positive news on Covid-19 vaccines.
We also believe last year’s privatization trend will continue, particularly involving controlling shareholders privatizing their listed companies for numerous reasons, namely restructuring of their operations, balance sheet structure reorganization, and opportunistically accreting their ownership.
We also anticipate a stronger equity deal flow as governments roll out vaccinations, firms transition to a new post-Covid normal, and IPOs put on hold due to the pandemic resume their plans.
Which sectors should drive the deal flow this year?
Logistics, healthcare, medical supplies, advanced technology, data centres and digital economy companies continue to be of focus. And we look to bring more mainboard IPOs to the market and originate capital raising debt or equity deals for the sectors with underlying strong secular growth.
What are the headwinds that could impact the capital markets going forward?
The biggest uncertainties this year involve new waves of Covid-19 infections or ineffective vaccines, which could lead to capital market volatility.
For further information, please contact: United Overseas Bank Limited www.uobgroup.com