Japan interest building, says Vale CFO Siani

Japanese bond investors are set to become more important for Latin American borrowers as US interest rates rise, Vale’s chief financial officer Luciano Siani, said on Thursday.

At present, Japan is “off the radar”, Siani said, because LatAm borrowers can tap US and European investors very quickly, at low costs and “hassle free”, creating little incentive to look for other buyer bases.

“Maybe the time has come, because … rates are going to raise in the US and Europe and Japan are doing QE and rates are very low, I start to see some interest in Japan,” he said.

At the same time, Japanese bond buyers are looking at a broadening range of investments: considering BBB-rated credits, and stretching into tenors of five to seven years, said Nomura’s head of Latin America capital markets Arthur Rubin. That’s a result of low domestic interest rates and limited local issuance.

Further broadening in Japanese investor’s appetite would be welcome, said Rogerio Sobreira, the head of Minas Gerais Development Bank. “The Japanese market is beginning to be more open to Latin America ,” he said. “Maybe this started with senior debt, but in the near future the market could be open to not only senior debt but also subordinated debt.”

Not everyone was so optimistic over the pace of change, however. “The Japanese investor is starting looking at US dollar corporate issuance, so this may not be a time that they can get into the Latin American market,” said Yoshihiro Satake, executive director of debt capital markets at SMBC Nikko. “Maybe they need some time … it may take a while, but they are getting closer, that’s for sure,” Satake said.

All spoke at LatinFinance’s Latin America Japan Investors Forum in Tokyo on Thursday. LF