In a note to clients, JPMorgan has indicated that the curb on US investors owning securities from various Chinese firms will affect bonds worth $60 billion and led to huge outflows due to forced selling.
Ban of US Investors on Chinese securities to affect $60 billion in bonds
The Trump administration issued an executive order in November last year banning US investors from buying securities of companies having ties with the Chinese military. However, most of the companies have denied this assertion, and the Chinese government says the claims lack evidence. Ahead of a list of subsidiaries owned by Communist military company, JPMorgan warned that around $55 to $60 billion in bonds will be affected should Treasury act. There have been significant outflows because of forced selling, and one company that has felt the impact is ChemChina, which suffered $1 billion forced selling following the order. The company could suffer an additional $1.3 billion in losses from affected investors.
Goldman Sachs issues $800 million sustainability bond
Despite the uncertainty, bond issuance continues to grow and early this week, Goldman Sachs issued its $800 million initial sustainability bond. The move comes as the finance giant seeks to mobilize around $750 billion in green finance in the next decade. Most importantly, the company will use the bond in supporting businesses and projects in nine areas. They include low-carbon transport, clean energy, waste management, sustainable food and agriculture, accessible healthcare, affordable educations, ecosystem services, community sustainability, and financial inclusion.
Goldman Sachs will allocate all finance as per its Sustainability Issuance Framework. According to the company, the framework couples the need for inclusive growth and decarbonization. The US finance giant will report on the proceeds allocation each year including, realized and expected financial, social, and environmental impacts.
Demand for green bonds increasing
Amundi has also launched an active emerging market green bonds fund managed actively and targeting corporate, but will equally include exposure to sovereigns in select countries such as India, Brazil, Indonesia, and China. According to the French fund manager, there has been an increase in demand for green bonds, with total issuance reaching $240 billion globally. Increased capital will boost energy transition and aid emerging markets curb climate change’s adverse effects.
Billionaire buying Asda raises £2.75 Billion from Junk bond sale
Investors have continued to hunt for returns as strong demand leading to billionaire buying Asda raising a large sterling junk bond. Investors have piled into the £2.75 billion debt sale backing the largest leveraged buyout in the UK for over a decade. This new junk bond is part of an elaborate series of asset disposal and debt deals through which Zuber and Mohsin Issa and equity firm TDR Capital will acquire a £6.8 billion grocery chain.
Although the structure has allowed buyers to put up a thin silver of their equity, the £2.75 billion bond sale attracted over £8 billion orders from investors enticed by the low debt burden of Asda and the £9 billion property value underpinning the deal.