Industry Insights - Spotlight on Investment Banking (Capital Markets ECM & DCM)

Shifting Tides in Asia’s Debt Markets

After a turbulent period marked by rising global interest rates and cautious sentiment, Asia’s debt capital markets are showing clear signs of revival. In 2024, debt issuance across Asia-Pacific surged by about 50% compared to 2023, a sharp rebound that outpaced every other region. This upswing was driven largely by improving macroeconomic stability: inflation began to moderate, and central banks eased back on tightening. Notably, the U.S. Federal Reserve pivoted late in 2024, cutting rates by a full percentage point, which has made dollar-denominated bonds more attractive for Asian issuers. As a result, companies that had been relying on local-currency funding during the high-rate environment are once again looking outward to international debt markets.

Banks and analysts forecast a robust increase in Asian USD bond volumes in 2025. Citigroup, for example, projects Asia (ex-Japan/Australia) dollar bond issuance to rise roughly 20% year-on-year, reaching about $220–$225 billion . In just the first days of 2025, over $6 billion in new dollar bonds were issued by Asian borrowers, an early indicator of this momentum. The driving force behind the resurgence is primarily China’s corporate sector, especially its technology giants. After a lull, high-grade Chinese companies are returning to offshore markets; China’s dollar bond issuance jumped 81% in 2024 (to $77.1 billion) as firms like Alibaba and Meituan tapped international investors. In a landmark deal late last year, Alibaba raised $5 billion through a dual-currency bond, the largest APAC bond offering of 2024, which drew an astonishing $14.6 billion order book from global investors. This deal, Alibaba’s first dollar bond since 2021, underscored that investor appetite for Asia’s top-rated credits remains strong, allowing borrowers to secure funding at tighter spreads.

Several factors are contributing to the improved climate. First, lower global yields have reduced the cost differential between issuing in U.S. dollars versus local currencies. For much of 2022–2023, record-high U.S. rates made it cheaper for Asian firms to borrow at home in their local markets . Now, with U.S. rates off their peak, the pendulum is swinging back, dollar bonds are becoming more affordable relative to domestic debt, drawing issuers who had sat on the sidelines. Second, investor liquidity in Asia remains abundant. Even amid recent volatility, large debt offerings from the region have seen hefty oversubscription. For instance, a $500 million note from Korea Expressway in mid-2024 attracted over $2.5 billion in orders, and a EUR1 billion green Tier-2 issue by Commonwealth Bank of Australia saw a 4× oversubscribed book . Such demand signals that investors worldwide are eager to deploy cash into Asian credits, provided the pricing meets expectations. Lastly, Asian issuers are also diversifying funding currencies to seize windows of opportunity. Some are turning to the euro and other currency markets to capitalise on pockets of investor demand. In 2023, Singapore’s Temasek Holdings and multiple Australian corporates tapped the euro market, which offered competitive pricing and deep European investor interest, especially for ESG-themed debt. By swapping issuance currency or exploring niches like Formosa bonds (as Korea Development Bank did with a US$300 million Taiwan offering ), Asian borrowers have shown agility in raising funds despite global headwinds.

Impact Across the Region

The reawakening of capital markets is being felt unevenly across Asia. China, after a stringent crackdown and economic slowdown that dampened capital raising in 2022-2023, is now witnessing a cautious recovery. While its troubled real estate developers remain largely locked out of offshore markets, China’s state-owned enterprises and tech leaders are driving new issuance. These higher-quality names are comfortable issuing now that interest rates have stabilised, focusing on refinancing debt and funding expansion. Hong Kong, as a key listing and issuance hub, has also picked up steam. 2025 opened on a high note with sizable deals (like a US$5.6 billion capital raise by EV-maker BYD in Hong Kong), signalling returning optimism.

Elsewhere, India has emerged as a capital markets bright spot, particularly on the equity side. It led the world in the number of IPOs for two years running, with 338 deals in 2024 , and its domestic bond market is deepening alongside rapid economic growth. Indian issuers had shifted towards rupee bonds when dollar financing was expensive, but now some of that volume is expected to flow back to dollar markets as global rates ease . South Korea saw dollar bond issuance rise ~14.5% in 2024 to nearly $50 billion , fueled by demand from international investors seeking to diversify beyond the U.S. However, political uncertainty in Korea has injected a note of caution; some investors may wait for clearer stability before ramping up purchases of Korean corporate debt . And in Japan, unique dynamics are at play: the Bank of Japan’s exit from negative rates (raising its benchmark rate to 0.5%, the first hike in years) has slightly cooled its domestic bond market. Japan was in fact the only major market globally that saw DCM activity dip in 2024 , as rising local yields made companies more hesitant to issue. In response, Japanese firms are exploring alternative financing, notably, hybrid instruments, to fortify their balance sheets without incurring excessive interest costs.

How Banks and Issuers Are Reacting

Citigroup: Global investment banks are positioning to capitalise on Asia’s debt resurgence. Citigroup’s Asia-Pacific syndicate desk has been upbeat, forecasting a significant uptick in deal flow and arranging early issuances in 2025. The bank notes that a revival of big-ticket Chinese tech bond deals (and a pickup in Indian offshore issuance) will be crucial to hit the projected $220+ billion regional volume . As one of the top bookrunners in Asian debt, Citi stands to gain as higher issuance nudges underwriting fees upward. Indeed, bankers report that late 2024’s marquee deals, like Alibaba’s multi-billion-dollar bond, have already contributed to improved fee pools, a trend likely to continue this year. Citi and its peers are also advising clients on timing the market: some issuers front-loaded their funding in early 2024, and others are now cautiously watching rate moves in 2025 before proceeding. This “wait-and-see” approach means banks must be agile, ready to execute quickly when windows open.

ICBC (Industrial & Commercial Bank of China): Asia’s domestic capital markets are dominated by indigenous players like ICBC, which was recognised as 2025’s best debt bank in Asia-Pacific. Leveraging its massive balance sheet, ICBC ramped up lending and bond underwriting to support China’s economy through the low-rate period. In the first half of 2024 alone, it underwrote nearly ¥770 billion in domestic corporate bonds, leading the Chinese market by deal volume. This reflects a strategic push by Chinese banks to propel local issuance and stabilise funding for key sectors (manufacturing, infrastructure, green projects, etc.). Now, as conditions improve, ICBC and its fellow Chinese banks are expected to facilitate even more onshore and offshore deals. They are increasingly coordinating with global banks on cross-border offerings, ensuring Chinese issuers can access international investors when favourable opportunities arise. The cooperation between local and global banks is especially evident in Hong Kong and dollar bond markets, where Chinese banks’ client relationships complement foreign banks’ distribution networks.

SoftBank Corp.:  Some Asian issuers are exploring innovative financing routes in response to the changing rate environment. A prime example is Japan’s SoftBank Corp., which in late 2023 pioneered the country’s first public offering of bond-type class shares, a hybrid instrument blending features of bonds and equity. Facing rising borrowing costs after the BOJ’s rate hike, SoftBank sought to bolster its capital base without heavily diluting common shareholders. The result was Series 1 and Series 2 bond-type preferred shares that carry fixed dividends of 2.5% and 3.2% respectively (for the first five years) . SoftBank raised a total of ¥320 billion through these two offerings, effectively receiving equity credit (improving its leverage ratios) while paying a yield closer to debt. This manoeuvre provided a cost-effective alternative to issuing straight bonds, which would have demanded higher coupons post-rate hike. The success of SoftBank’s hybrid issuance, both tranches were listed on the Tokyo exchange to ensure liquidity, has attracted attention across Asia. It showcases how corporations can adapt their capital structures using creative instruments when traditional financing becomes pricey. Going forward, more companies in the region may consider such hybrids or perpetual securities to balance investor appeal against financing costs.

Broader Implications and Outlook

The re-emergence of Asia in global capital markets carries broad implications. For one, the renewed flow of Asian dollar bonds provides international investors with greater exposure to Asia’s growth, after a period when many had scaled back. Funds that previously shunned Chinese credits due to regulatory and economic concerns are cautiously returning to select issuers, while those wary of China have shifted focus to alternatives like India and Southeast Asia. This realignment means Asian issuers must compete for investor attention, emphasising credit quality and transparency. The absence of China’s high-yield property developers (still mired in a debt crisis) has tilted issuance toward higher-grade offerings, a trend that could improve overall market stability, but also means yield-hunting investors need to look elsewhere (such as India’s infrastructure bonds or Southeast Asian corporates) for higher returns.

Another implication is the intensified competition among investment banks. Wall Street and local Asian banks alike are ramping up their capital markets teams to chase the expanding deal pie. Fee revenues from DCM underwriting globally hit $27.3 billion in 2024 , and Asia’s share is set to grow as issuance volumes climb. This is encouraging banks to broaden their product offerings, from arranging sustainable “green” bonds (where European investors’ appetite is particularly strong ) to facilitating liability management exercises for clients looking to refinance expensive debt. Notably, banks with a nimble, cross-market approach are thriving: for example, Societe Generale’s Asia-Pacific team strategically connected issuers with European investors to secure lower-cost funding in euros, and helped reopen niche markets like Taiwan’s Formosa bond venue for foreign issuers. Such agility in tapping different investor pools and currencies is becoming a key differentiator.

Finally, Asia’s capital market revival underscores the region’s growing financial maturity. As economies like India and China deepen their local investor base, they become less dependent on any single funding source. In India, a surge of retail and institutional investment has enabled jumbo equity offerings and could bolster local debt absorption as well. In China, government support measures and reforms are gradually restoring confidence, illustrated by a 40% jump in dollar-denominated convertible bond issuance in 2024 as companies sought alternative funding avenues. These developments point to Asia’s increasing resilience: even when global conditions tighten, the region can adapt by leaning on domestic liquidity or financial innovation until external windows reopen.

Conclusion

Asia’s investment banking capital markets are entering the second half of 2025 with renewed momentum. The combination of a more benign rate environment and adaptive strategies by issuers has reignited activity in both debt and equity arenas. We have seen the pendulum swing from a cautious lull to a phase of opportunity, characterised by heavyweight deals like Alibaba’s bond and a pipeline of anticipated offerings across the region. Yet, market participants remain vigilant. Volatility could resurface if global inflation surprises or geopolitical tensions rise, and not all parts of Asia are out of the woods (for instance, credit stresses persist in certain sectors).

Overall, the outlook is cautiously optimistic. Asian capital markets have demonstrated their ability to recalibrate and innovate in the face of challenges, whether through tapping new investor bases, leveraging hybrid instruments, or timing the market deftly. This bodes well for the region’s corporates and investors alike. As the search for yield and growth continues, Asia is firmly back in the spotlight, offering a dynamic arena for capital raising. Investment banking teams focusing on Asia will need to stay agile, but they can take confidence in the region’s robust fundamentals and the compelling opportunities arising from this capital markets reawakening.