(Bloomberg) — A brand new convertible bond providing by a serious provider to Apple Inc. will add to the greenback funds raised by Taiwan’s tech corporations this 12 months, because of the hybrid securities’ reputation and demand for synthetic intelligence investments.
Most Learn from Bloomberg
Quanta Laptop Inc., a MacBook contract producer, is looking for to boost as much as $1 billion by promoting convertible notes, it introduced in a submitting dated Friday. The corporate mentioned it would use the proceeds to purchase uncooked supplies.
“We see the AI theme to be a elementary change to the enterprise combine and capital expenditure wants for the Taiwanese firms, which can set the pattern for Taiwan’s fairness capital markets over the subsequent few years,” mentioned Brian Chau, co-head of Asia equity-linked offers at UBS Group AG.
World enthusiasm about AI is driving growth plans by chipmakers and tech corporations, lots of that are primarily based in Asia, resulting in elevated borrowing wants. Some are turning to convertible bonds given the excessive rates of interest surroundings, because the hybrid notes’ fairness part sometimes means coupons are decrease than on common debt.
Taiwanese firms have offered $1.3 billion price of dollar-denominated convertible bonds to date in 2024, already surpassing the annual complete raised in every of the final two years, Bloomberg-compiled information present. Additionally they have issued a mixed $2.9 billion of extra shares within the US foreign money this 12 months, exceeding any full-year determine since 2007.
The patrons of the latest share gross sales embrace sovereign wealth funds and long-only funds that search publicity to AI however traditionally haven’t invested in such corporations, mentioned Rob Chan, head of equity-linked origination for Asia Pacific at Citigroup Inc.
Taiwan’s tech corporations have been huge beneficiaries of the AI frenzy. Chip big Taiwan Semiconductor Manufacturing Co.’s US-listed shares have jumped 66% this 12 months, whereas Quanta’s Taipei-listed inventory is up about 20%.
The surge in greenback funding by native corporations additionally displays their must hedge in opposition to a weaker Taiwan greenback. The island’s foreign money has dropped about 5% in opposition to the dollar this 12 months, the second worst-performer in Asia behind the South Korean received.
An identical pattern has occurred in China, the place tech behemoths Alibaba Group Holding Ltd. and JD.com Inc. offered dollar-denominated convertible debt in Might, partly to to fund share buybacks within the US.
Whereas the latest pullback in AI-related shares around the globe might sluggish fundraising within the close to time period, extra extra share gross sales by Taiwanese firms are possible on faucet for the subsequent 12 to 18 months, mentioned UBS’ Chau.
Taiwanese tech firms that even have raised funds this 12 months embrace pc storage gadgets maker Wiwynn Corp., in addition to semiconductor-related corporations GlobalWafers Co. and Alchip Applied sciences Ltd.
“There’s a actual use case for money, given the expansion of those companies — it’s not about firms seeking to reap the benefits of excessive inventory costs,” mentioned Citigroup’s Chan. “I don’t assume {that a} little bit of market volatility goes to close off the best way that firms plan for accessing the markets to fund development.”
–With help from Jane Lanhee Lee and Julie Chien.
Most Learn from Bloomberg Businessweek
©2024 Bloomberg L.P.