Martin Kuehle from Fisch Asset Management explains that despite the slowdown in the region, Asia remains the powerhouse of economic growth with a solid state of finances. None of the following megatrends is brand new, but all point in the same direction: population growth, establishment of a middle class, domestic consumption and government deficits.

“You would think there should be more convertibles out there – and we are positive that we see more issuance if one of the following things happens. First of all, lower volatility on the equity market. That will lead to somewhat healthier levels of implied volatility so that the premium on that conversion rights becomes more attractive for the issuers. Also, just calm and less panic in the equity market could trigger again a new issue of convertible bonds. Secondly, higher interest rates could trigger more issues. Right now with interest rate levels low in the US and in Europe, corporate treasurers can issue straight bonds with low coupons,” he said.

Read Martin Kuehle’s interview

Not disagreeing with Kuehle, is Emma Yan, the Managing Director of Oxleyan Capital. She explains that on a macro level, the region’s relative economic strength provides numerous growth opportunities.

“We’ve already seen the flow of funds shift weight from the West to the East as the region’s growth continues. Convertible bonds could serve as a viable platform for companies to raise capital. Recently, we have seen increasingly larger issues coming from Asia, such as the ¥40bn issue from Bank of China. As Asia accounts for an increasingly larger share of new issues globally, convertible issuance will also rise,” explained Yan.

“In addition, bond markets are still in its infancy stages in many Asian markets such as China. The development of bond markets will also prove to be a positive for CBs. On a micro level, more than half of Asian CBs are trading below their theoretical fair value after the recent market sell-off, thus providing attractive opportunities,” she added.

Download the full interview with Emma