2015-12-17 04:13:38.176 GMT

By Neha D’silva and Lianting Tu

(Bloomberg) — Offshore HY bond sales which were already substantially lower this yr due to Chinese issuers going

onshore, commodity depression and EM currency distortions could drop another 20% next yr, says Florian Schmidt,

SC Lowy’s  H.K.- based head of debt capital markets.

* NOTE: HY issuance in Asia in USD fell to $17.6b this yr after a record $31.1b last yr: Bloomberg data

* “We will probably see more open market buybacks, tender offers and exchange offers as issuers manage their debt

stock but we won’t see a huge amount of primary activity,” Schmidt says in interview with Bloomberg

* Schmidt says commodity and energy prices need to be watched

* “That is what triggers volatility and longer term movements in valuations as far as the Asian high yield market is concerned.”

CHINA GOES ONSHORE

* “The impact of the opening up of China’s onshore market on the offshore Asia-Pacific landscape has been remarkable,” he says

* NOTE: Chinese property developers, which regulators allowed back into the onshore bond market in 2014, more than tripled

local offerings to CNY413.9b yuan of notes this yr; their offshore sales more than halved to $10.6b

* “Chinese companies got a reasonably painful remainder of currency risk. The engineering of a depreciation trajectory

of the renminbi by the PBOC plus the tax deductibility of onshore interest payments would be two other reasons that

would drive Chinese companies to the domestic market.”

* “A vast majority of them say they still want to stay connected to the international bond market but offshore won’t be their

first port of call for new issuance.”