拉丁美洲经济委员会-流入拉丁美洲和加勒比的资本：2021年前9个月（英）-2021-51页_1mb

Capital Flows to Latin America and the Caribbean: First Nine Months of 2021

Core Content

This report provides an analysis of capital flows to Latin America and the Caribbean (LAC) in the first nine months of 2021, focusing on bond markets, debt management, and equity flows. It highlights the region's bond issuance, credit rating developments, and the increasing role of ESG-related bonds.

Key Findings

Total Bond Issuance

• Total LAC bond issuance in international markets reached US$ 124.4 billion in the first nine months of 2021, representing a 6% increase compared to the same period in 2020.
• The first half of the year saw a record high of US$ 92 billion in bond placements, while the third quarter amounted to US$ 32.6 billion, a 18% decrease from the second quarter but 12% higher than the third quarter of the previous year.
• Adding October, the total issuance for ten months reached US$ 138 billion.

Top Issuers

• The top three issuers, combining corporate and sovereign, were Brazil (24%), Mexico (23%), and Chile (20%), together accounting for 67% of the total regional issuance.
• The top three sovereign issuers were Chile (31%), Mexico (18%), and Colombia (12%), followed by Peru (10%), with the four sovereigns collectively accounting for 71% of total sovereign issuance.

Bond Tenor and Types

• The weighted average tenor of sovereign bond issuances increased to 21 years in the first nine months of 2021, up from 19 years in 2020.
• Mexico and Chile issued 50-year bonds in January and September, respectively. Chile's 50-year bond was a social bond, and it also issued two 40-year social bonds in January and July.
• Colombia and Panama issued 40-year bonds in January.
• Green, social, sustainability, and sustainability-linked bonds (GSSS) accounted for US$ 39.2 billion, or 31.5% of total issuance, a 31.5% increase compared to 2020 and more than eight times the 2015-2020 average.

ESG Bonds

• Sustainability-linked bonds (SLBs) were the most used ESG instrument, accounting for 37% of the GSSS issuance.
• Green, social, and sustainability bonds made up 13%, 36%, and 14%, respectively.
• Chile accounted for 94% of the region's social bond issuance in the period.
• 60% of the region's SLB issuance was from high-yield issuers, opening access for non-investment grade companies.

Credit Spreads and Quality

• LAC bond spreads widened by 13 basis points in the first nine months of 2021, with 19 basis points widening in the third quarter due to risk-off sentiment and rising U.S. Treasury yields.
• Venezuela had the highest spreads at the end of September 2021, at 31,941 basis points, while Colombia had the lowest at 301 basis points.
• Mexico had the highest spreads among investment-grade countries at 360 basis points.
• Investment-grade issuers accounted for 58% of total issuance, while high-yield issuers represented 42%.

Credit Rating Actions

• There were 17 negative actions and 2 positive actions in the first nine months of 2021, with 11 downgrades and no upgrades.
• Negative credit rating actions have outnumbered positive actions for eight years, and the imbalance worsened in 2020.
• Colombia lost its investment grade with two downgrades, while El Salvador, Panama, and Peru were also downgraded.

Equity Flows

• Latin American equity prices declined by 9% in the first nine months of 2021, ending below pre-pandemic levels.
• The MSCI Latin American Index was down 24% compared to pre-pandemic levels, while the G7 index rose 12%.
• Limited vaccine supplies, supply chain disruptions, and economic uncertainty contributed to the decline in equity prices.

Corporate Bond Spreads

• LAC corporate bond spreads tightened by 10 basis points from January to September 2021, more than other emerging market regions, except Asia.
• At the end of September, corporate spreads were 302 basis points, lower than most other emerging market regions, except the Middle East.

Main Views

• The surge in bond issuance was driven by low global interest rates and anticipation of tighter borrowing conditions in the following year.
• ESG bonds have become a significant part of the region's capital flow strategy, reflecting growing interest in sustainable development.
• Investor demand for ESG-related bonds has increased, with SLBs being the most popular instrument due to their performance-based structure.
• Credit quality in the region continued to deteriorate, with more negative rating actions than positive, indicating persistent economic and fiscal challenges.
• Equity markets remained volatile and underperformed, influenced by pandemic-related issues and global economic uncertainty.

Key Information

• Chile was the largest issuer in the region, with US$ 15.6 billion in sovereign and corporate bonds.
• Mexico and Chile issued 50-year bonds, with Chile's being a social bond.
• Colombia and Panama issued 40-year bonds in January.
• GSSS bonds reached a record high of US$ 39.2 billion, with SLBs accounting for 37% of the total.
• Negative credit rating actions have dominated for eight years, with 17 negative and 2 positive actions in the first nine months of 2021.
• Equity prices declined by 9%, and corporate spreads tightened by 10 basis points.

Conclusion

The first nine months of 2021 saw record bond issuance in Latin America and the Caribbean, driven by low interest rates and anticipation of tighter conditions. The ESG bond market grew significantly, with SLBs becoming the most used instrument. However, credit quality remained a concern, with more negative rating actions than positive. Equity markets continued to struggle, influenced by the ongoing pandemic and economic uncertainty.