SINGAPORE's corporate debt market grew at a healthy clip in 2006, as more developers and foreigners issued bonds to take advantage of low interest rates. And this came amid strong demand for fixed-income assets, supported by a sound regulatory environment, the Monetary Authority of Singapore (MAS) said yesterday.

In its 2006 review of the corporate debt market, the MAS said outstanding Singapore dollar-denominated and non-S$ denominated debt securities last year continued to see an upward trend, increasing by 11 per cent to $67 billion, and 17 per cent to $90 billion respectively.

Total debt issuance in Singapore also increased substantially, by 37 per cent to $157 billion in 2006.

The market saw a surge of property-related debt issues double to $4 billion from $2 billion in 2005, reflecting the upturn of the real estate sector and relatively cheap cost of funding locally compared with going offshore.

Citigroup economist Chua Hak Bin said property developers have turned to the debt market to raise funds, reducing their reliance on banks.

'They have been replenishing their landbanks, given the surge in collective sales. Property-related debt issues have doubled from a year ago, albeit from a low base. That shifts away some of the risk from the banking system, reducing the concentration risk from property-related loan exposure,' said Dr Chua.

This is an improvement from the pre-crisis days, when the bond markets was still in its infancy, he said.

Property developers continued to raise more money from the debt market this year. Notable bond issuers were CapitaLand and GuocoLand. In May, CapitaLand's $1 billion convertible bond issue - the largest in Singapore - sold out in three hours. GuocoLand had a $690 million convertible bond issue in April.

Another discernible trend that continued in 2006 is the rise in number of foreign issuers tapping the S$ bond market.

In 2006, about one-fourth of S$-denominated new issuance, or $6 billion, is attributable to foreign issuers, representing more than twice the volume from 2005. The foreign issuers included Asian Development Bank, Cathay Pacific Airways Ltd, Emirates Airlines, Export-Import Bank of Korea, and General Electric Capital Corporation.

In terms of geographical distribution, Asia Pacific companies continue to make up a significant portion of 47 per cent of the foreign entity issuers in 2006.

Structured products accounted for a significant portion of 43 per cent of the S$-denominated debt market. Structured products included asset backed securitisation (ABS) transactions, equity-linked notes, convertibles, and credit-linked notes.

In particular, ABS transactions, which rose to $7 billion in 2006 from $6 billion in 2005, accounted for 64 per cent of S$ structured debt issuances.

Non-S$ structured credit has grown by 80 per cent to $24 billon in 2006, taking up 18 per cent of total non-S$ debt issuance, as compared with 14 per cent in 2005.

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