Credit Crunch: Around the World of Global Credit in 60 Minutes

The Asia convertible‑bond market has exploded this year, with more than $42 billion issued since April 2024 and $3.9 billion in the last month alone. Higher U.S. rates and rising equity volatility have revived convertible arbitrage funds, which prize the equity option and the steep volatility discount. Issuers such as Alibaba, Taiwanese tech firms, and mineral‑sector companies are attracted by near‑zero‑cost funding and the ability to hedge currency risk or fund buybacks. This dual demand‑supply dynamic makes converts a rare low‑cost financing tool while offering investors upside exposure in a region that has outperformed Europe.

Meanwhile, Chinese corporations are increasingly turning to offshore dim‑sum bonds, capturing roughly 190 basis points of cost savings versus traditional dollar issuance. The shift reflects a broader flattening of EM Asia dollar‑bond supply, as LGFV and property‑exchange issuances normalize and gross issuance is projected to be flat in 2026. Bloomberg Intelligence estimates total EM Asia dollar issuance near $250 billion, with India and select Southeast Asian markets providing modest growth. The dim‑sum advantage, combined with lower USD funding costs, is reshaping credit allocation for high‑grade issuers seeking RMB‑linked financing.

In the Middle East, GCC sovereign spreads have held steady despite heightened geopolitical tension, with Saudi CDS hovering around 80 bp and Bahrain modestly higher. Credit quality remains solid, and the region continues to dominate EM dollar issuance, driven by Saudi, UAE, and Kuwait sovereigns and a surge in sukuk, now covering roughly one‑third of total supply. Real‑estate issuances are also rising on a booming property market. The current spread compression offers attractive entry points for investors willing to navigate regional risk, while the growing sukuk market adds a diversified, Sharia‑compliant avenue for credit exposure.