Here’s how bad it is in Southeast Asia’s retail industry for sellers.
They are paying more to borrow money to keep their business going than consumers do to keep buying from them.
Courts Asia Ltd., which offers shoppers zero percent long-term credit on higher-end products, has seen its Singapore dollar bond yields rise 28 basis points to 4.34 percent in the past six months and is trying to refinance the note ahead of its May repayment, Bloomberg reports.
The yield on US currency bonds of Parkson Retail Group Ltd., part of a Malaysian retailer which operates across Southeast Asia, has soared 320 basis points to 10.21 percent.
Sagging global growth and rising household debt is knocking consumer demand across Southeast Asia, with Indonesian phone seller PT Trikomsel Oke in November becoming the first company to default on Singapore dollar bonds since 2009.
Retailers that borrowed to finance growth are also losing ground to online market places like Alibaba Group Holding Ltd.
The median debt load of the region’s retailers rose to 1.75 times operating profit in latest filings compared with 1.3 at the end of fiscal 2014.
“I have been very careful about some local currency corporate bonds,” said Singapore-based Desmond Soon, co-head of investment management for Asia at Western Asset Management Co., which had US$446 billion under management at Sept. 30 and held Courts Asia bonds as of Nov. 30.
“Bricks and mortar retailers do have an issue,” Soon said.
Retail store sales in Singapore dropped for a third month in November, falling 2 percent from a year earlier, Department of Statistics data show.
Meanwhile, online transactions in the region are growing.
Singapore Post Ltd.’s domestic e-commerce orders in Southeast Asia and Australia rose 384 percent in the 12 months through November, according to a company presentation.
Courts Asia, which sells goods from electronics to home furniture in Singapore, Malaysia and Indonesia, began meeting investors last week ahead of its scheduled S$125 million (US$87.1 million) repayment of notes in May. It’s looking to raise funds to help refinance and repay the bond, Courts’s Singapore-based spokeswoman Tammy Teo said.
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