This chapter provides information on how Asian corporations were able to access financing via public equity and corporate bond markets during the COVID‑19 pandemic. It tracks financing activity on a monthly basis and provides a detailed characterisation of the use of market-based financing at the industry and market level. It also takes stock of the fiscal and regulatory measures taken by Asian authorities in response to the pandemic to mitigate the effects on the corporate sector.
Corporate Finance in Asia and the COVID-19 Crisis
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2. Navigating the pandemic
Abstract
2.1. Market-based financing during the pandemic
In the wake of the 2008 financial crisis, access to market-based financing gave many corporations the financial resilience that enabled them to overcome a temporary downturn while meeting their obligations to employees, creditors and suppliers. In 2020 and 2021, during the COVID‑19 pandemic, corporations’ access to capital markets was equally important to mitigate liquidity shortages and avoid defaults and bankruptcies. From a longer-term perspective, structural policies that facilitate efficient and affordable market‑based financing of viable companies will be crucial in order to strengthen long-term resilience and help companies endure future shocks.
When discussing the long-term implications of the crisis, it is important to understand how capital markets reacted to the COVID‑19 crisis. This section provides key indicators on how the non‑financial corporate sector used public equity and corporate bond markets throughout 2020 and 2021, analysing the short-term impact of the COVID‑19 crisis on market‑based financing.
2.1.1. Public equity markets
In 2020 and 2021, the non‑financial corporate sector made extensive use of public equity markets. The total amount of capital raised by non‑financial companies through initial public offerings (IPOs) and secondary public offerings (SPOs) reached record values of USD 826 billion in 2020 and USD 1 trillion in 2021. Notably, 44% of the total amount raised globally in both years was raised by Asian non‑financial companies, totalling USD 351 billion and USD 454 billion, respectively. At the beginning of 2020, the COVID‑19 outbreak caused major uncertainties that translated into high market volatility and a significant decrease in the non‑financial corporate sector’s use of primary public equity markets. Globally, the total amount of capital raised by non‑financial companies during the first quarter of 2020 was considerably lower than the previous five-year average (Figure 2.1). This downturn reversed during the second quarter. Importantly, the third and fourth quarters of 2020 showed a significant increase in the amount of capital raised (driven mostly by SPOs) compared to the previous five‑year average.
In Asia, the amount of capital raised during the first quarter of 2020 contracted by around 20% compared to the previous five‑year average (Figure 2.1). The decline was most pronounced in advanced Asian markets with a 60% decrease compared to the previous five-year average, while in emerging and developing Asia (excluding China) it declined by around 20%. Japanese and Chinese non‑financial corporations’ capital raising activity declined by around 35% and 13%, respectively, compared to their historical averages. During the third quarter of 2020, this trend reversed (following the global trend) in Asia, as non‑financial companies raised funds amounting to USD 136 billion, with China and Japan accounting for 68% and 19% respectively of that amount.
In the first and second quarters of 2021, the global amount of equity raised via IPOs and SPOs peaked, totalling almost USD 280 billion, twice the average proceeds raised in the 2015‑19 period. Primary equity market activity remained vibrant in the second half of 2021, surpassing its historical averages, albeit somewhat lower than in 2020. Similarly, the equity capital raised by Asian companies reached record levels averaging USD 113 billion per quarter. Notably, Chinese companies accounted for 64% of the proceeds raised in public equity markets by Asian companies in 2021, while companies from other emerging and developing Asia represented only 12% and companies from advanced Asia the remaining 24%.
Figure 2.1. Equity capital raised by non-financial companies in public markets in 2020 and 2021
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Source: OECD Capital Market Series dataset, see Annex for details.
At the industry level, the total capital raised during the first quarter of 2020 declined in most industries, except for healthcare, consumer non-cyclicals and telecommunications services, both globally and in Asia. Globally, the largest contraction in fundraising through public equity markets took place in the utilities, energy and consumer cyclicals industries (OECD, 2021[2]). In Asia, the contraction of those three industries was more significant than globally. In addition, in Asia the capital raised by basic materials companies decreased significantly (Figure 2.2). In contrast, in the second quarter of 2020, all industries, except for energy and basic materials, raised significantly more capital than the previous five‑year average globally (OECD, 2021[2]). In Asia, the energy and telecommunications services industries raised a record amount of funds, six and three times their previous five‑year average, respectively, while the basic materials, consumer cyclicals, and technology industries continued their contraction. Notably, the healthcare industry raised USD 50 billion globally during the second quarter, compared to an average of USD 21 billion during the 2015‑19 period (OECD, 2021[2]). During the last three‑quarters of 2020, Asian companies from the healthcare industry tripled their use of public equity markets compared to the previous five‑year average. In the third quarter, every industry, except energy, raised more capital than in the previous five years both globally and in Asia. In the fourth quarter, globally, six out of nine industries raised more capital and, in Asia, seven out of nine industries did.
In 2021, during the first quarter, all industries, with the exception of telecommunications services, raised more capital than in the first quarter of 2020. During the first quarter of 2021, technology companies raised USD 27 billion compared to USD 4.4 billion in 2020 and USD 8.5 billion in 2015‑19. Remarkably, in January 2021, the Chinese technology company Kuaishou Technology Co Ltd, conducted its IPO in the Hong Kong (China) market, raising USD 6.2 billion, the largest IPO in Asia in 2021 and the second largest globally. During the second quarter of 2021, consumer cyclicals accounted for 21% of the proceeds raised in the region, more than three times during the same period in 2020. Following the same path as during the fourth quarter of 2020, industrials raised a record of USD 36 billion of public equity, twice the 2015‑19 average.
Figure 2.2. IPOs by Asian non-financial companies in 2020 and 2021 by industry
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Source: OECD Capital Market Series dataset, see Annex for details.
A closer look at global developments on a monthly basis shows that IPO activity almost came to a halt in March 2020 in several regions, when only six European companies and one US company went public, amounting to a modest total of USD 100 million. In May, the IPO activity in Europe recovered, totalling USD 3.6 billion. In the United States, the rebound was particularly strong in June 2020, when 19 non‑financial IPOs raised a record amount of USD 10.6 billion (OECD, 2021[2]). In contrast, 65 Asian non‑financial companies went public in March 2020 raising USD 4.6 billion, similar to the previous five‑year average. In particular, 29 Chinese non‑financial companies raised USD 2.8 billion, accounting for 41% of the global equity raised in March 2020. Also in March, five Indian non‑financial companies went public raising USD 1.4 billion, almost four times the previous five-year average. Chinese and Indian non‑financial companies accounted for more than 90% of the total IPO funds raised in Asia in March 2020. In February 2020, USD 2.5 billion were raised by ASEAN companies, a significant increase from the USD 105 million raised in the 2015‑19 period. The IPO of a Thai consumer non-cyclicals company amounting to USD 2.52 billion made up the lion’s share of this amount. IPO activity in advanced Asian markets was modest overall when compared to the previous five-year average; the capital raised was higher than in the previous five years only in February and August (Figure 2.3).
Globally, in the second half of 2020, IPO activity peaked at almost twice the 2015‑19 average. This trend was particularly pronounced in China and the United States. In December 2020 alone, companies from China and the United States raised USD 13.4 billion and USD 11.9 billion, respectively, through IPOs (OECD, 2021[2]). Interestingly, in Korea, USD 1.5 billion was raised via IPOs in August and September, four times the amounts raised in the same months of the previous five years. IPO activity in Japan was weak throughout 2020. There was some activity in December when 26 Japanese companies went public, raising a total of USD 1.2 billion, although this was still significantly below the previous five-year average.
In 2021, IPO activity reached a historical record globally. In June and July alone, USD 47 billion and USD 41 billion respectively was raised through IPOs. Throughout the year, the monthly capital raised exceeded historical averages. In Asia, the monthly amount raised via IPOs accounted on average for 42% of the global amounts. IPOs conducted by Chinese companies were substantial during 2021, particularly in January, June and December with more than USD 13 billion in each month. Notably, in March 2021, 80% of the USD 7.4 billion raised by companies from advanced Asia corresponded to IPOs by Korean companies.
Figure 2.3. Monthly initial public offerings by non-financial companies in 2020 and 2021
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Source: OECD Capital Market Series dataset, see Annex for details.
Overall, in 2020, IPOs were dominated by non-financial companies from emerging and developing Asian markets, mainly driven by Chinese IPOs. As a result, the share of IPOs from advanced Asian markets only accounted for 8% of total Asian IPOs. A comparison against previous five-year averages reveals important differences in how jurisdictions were affected by the COVID‑19 crisis (Figure 2.4). Non-financial companies from China and Thailand raised significantly more funds than the previous five-year average, doubling and tripling the amounts, respectively. Indian non-financial companies’ use of IPOs was 24% higher. Contrarily, IPOs from Japan and Hong Kong (China) fell by 68% and 87%, respectively. Cambodia, Indonesia, Malaysia, Pakistan and Chinese Taipei, with comparatively smaller public equity markets, also experienced contractions in the amounts of funds raised in 2020, while Bangladesh saw an increase. Non‑financial companies from Mongolia, Sri Lanka and Viet Nam did not raise any funds via IPOs in 2020.
In 2021, as global IPO activity reached historical records, more than USD 150 billion were raised via IPOs in Asia. Although Chinese companies accounted for 70% of total Asian proceeds, companies from advanced Asia represented 18%, with companies from emerging and developing Asia (excluding China) making up the remaining 12%. Remarkably, 86 non‑financial Korean companies conducted an IPO in 2021, raising a total of almost USD 20 billion, against an average of USD 3.5 billion in 2015‑19. Indian companies rank third in terms of proceeds with a total amount of USD 12 billion in 2021 against USD 2.8 billion in 2020. Moreover, although Japanese companies did not exceed their historical IPO amounts, they raised USD 6.9 billion in 2021, ranking fourth in terms of IPOs in Asia. Notably, companies from Indonesia, the Philippines, Singapore and Chinese Taipei raised more proceeds via IPOs in 2021 than in 2020.
Figure 2.4. Initial public offerings by Asian non-financial companies in 2020 and 2021
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Source: OECD Capital Market Series dataset, see Annex for details.
In 2020, technology and healthcare companies raised the highest amounts of capital globally, accounting for 24% and 23% of the total amount raised through IPOs, respectively (Figure 2.5). In Asia, industrial companies raised the largest share of capital through IPOs, followed by healthcare and technology companies, accounting for 25%, 18% and 17% of the total amount raised in Asia, respectively. US technology companies raised a record amount of USD 24.4 billion, representing more than half of the global proceeds raised by the industry. Chinese technology companies followed with USD 14.6 billion raised, equivalent to 30% of global proceeds. Importantly, US and Chinese healthcare companies raised USD 19.3 billion and USD 15.9 billion, respectively. Industrials companies raised USD 35.5 billion globally in 2020, of which 60% corresponded to Chinese companies. In advanced Asia, IPO proceeds were dominated by consumer cyclicals representing 25% of total proceeds, followed by technology and industrials, representing 23% and 21% respectively. In emerging and developing Asia (excluding China), consumer non-cyclicals accounted for 30% of the proceeds and industrials for 24%. In ASEAN economies, almost 40% of the IPO proceeds were raised by consumer non-cyclicals companies and 19% by basic materials companies.
In 2021, technology companies were even more active than in 2020, raising USD 112 billion globally, representing 30% of global proceeds. Similarly, in China, 28% of the proceeds were raised by technology companies and 18% by healthcare companies. In advanced Asia, technology companies were also significant, accounting for one‑third of the proceeds followed by consumer cyclicals which represented 22%. Although consumer non-cyclicals were dominant in ASEAN economies in 2020, in 2021 consumer cyclicals were more important representing 30% of total proceeds.
In India, industrial companies dominated in 2020, with more than half of the capital raised followed by healthcare companies (31%) (Figure 2.6). In 2021, the industry distribution changed considerably, with more than 30% of the proceeds raised by telecommunications, 25% by consumer cyclicals and 19% by basic materials companies. In Korea, the three largest issuers in 2020 were the healthcare (31%), consumer cyclicals (27%) and industrials (24%) industries. In 2021, the picture remained similar with the difference that healthcare companies accounted for 16% and technology companies for 24%. In Japan, technology companies collected 35% of the proceeds raised via IPOs in 2020. This number increased substantially in 2021, when technology companies accounted for more than 60% of the proceeds. In Thailand, consumer non‑cyclicals and basic materials companies were the largest issuers in 2020 with 52% and 26% of the funds raised, respectively. In 2021, the energy industry raised the most proceeds, representing almost 70%.
Figure 2.5. IPOs by non-financial companies by industry
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Source: OECD Capital Market Series dataset, see Annex for details.
Figure 2.6 IPOs by non-financial companies by jurisdiction and industry
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Source: OECD Capital Market Series dataset, see Annex for details.
In the period following the 2008 financial crisis, already-listed non‑financial companies made extensive use of public equity markets to raise capital through secondary offerings. This trend repeated itself in 2020 and 2021, when already-listed non‑financial companies raised a total of USD 626 billion and USD 645 billion via SPOs, the highest amounts in the last three decades (Figure 2.7). Asian non‑financial companies raised a total of USD 250 billion in 2020 and USD 301 billion in 2021, 40% and 47% respectively of the global amounts. Notably, SPOs conducted by Chinese non-financial companies represented 60% of the capital raised by Asian companies in 2020, increasing to 62% in 2021. Companies in advanced Asia raised USD 72 billion in 2020 and USD 81 billion in 2021, representing 29% and 27% of the total Asian proceeds, respectively. Companies from emerging and developing Asia (excluding China) raised the remaining 10% in 2020 and 2021.
Figure 2.7. Monthly secondary public offerings by non-financial companies
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Source: OECD Capital Market Series dataset, see Annex for details.
The monthly SPO distribution reveals that in March 2020, the proceeds globally were below the past five-year average, while the average amount of capital raised between May and December 2020 was almost twice the five-year averages (Figure 2.7). Globally, more than 80% of the total capital raised via SPOs in 2020 was raised between May and December. In Asia, the proceeds raised through SPOs between February and April 2020 were below the past five-year average. In line with the global trend, the monthly average amount of capital raised almost doubled between May and December 2020. Remarkably, in India, almost USD 12 billion were raised by non‑financial companies in May and June together, more than six times the past five-year average of USD 1.9 billion. In Japan, SPO activity was strong in August, September and December, with proceeds of USD 11.5 billion, USD 13.6 billion and USD 7 billion, respectively. In seven out of the 12 months of 2020, SPO activity in ASEAN economies was lower than in the 2015‑19 period, although in September and December alone, the amount of capital raised was USD 3 billion and USD 4.2 billion, respectively.
As previously mentioned, SPO activity remained high in 2021. From January to April 2021 alone, the proceeds raised in Asia were greater than in the whole of 2020. During the first four months of 2021, companies from advanced Asia raised a total amount of USD 22 billion against USD 7.8 billion over the same period in 2020. Similarly, in China, at USD 81 billion the capital raised from January to April 2021 was four times larger than the same period in 2020, at USD 19 billion. Importantly, in August and September of 2021 alone, ASEAN companies raised a total amount of USD 17 billion through SPOs.
Similar to IPOs, SPOs were dominated by non-financial companies from emerging and developing Asia and mainly driven by Chinese companies. In 2020, the share of SPOs by advanced Asian companies was only around 29% of the total amount raised in the region. An annual comparison of SPOs with the previous five years reveals important differences in how companies made use of equity markets via SPOs during the COVID‑19 crisis (Figure 2.8). Chinese non-financial companies raised 51% more funds compared to the previous five-year average. While Japanese IPOs contracted significantly in 2020 (as shown in Figure 2.4), SPOs by Japanese companies more than doubled. The situation was similar in Singapore, where the funds raised via SPOs were almost five times higher than the previous five-year average. In Hong Kong (China) and Indonesia, SPO activity decreased considerably, with funds raised in these jurisdictions decreasing by 50% and 70%, respectively. Malaysia, Pakistan, Philippines, Sri Lanka, Chinese Taipei, Thailand and Viet Nam, with comparatively smaller public equity markets, also experienced a contraction in the amount of funds raised in 2020. Non-financial companies from Bangladesh, Cambodia and Mongolia did not raise any funds via SPOs in 2020.
In 2021, Chinese companies raised 25% more funds via SPOs than in 2020, reaching an amount of USD 187 billion. In 2021, Japanese companies raised less capital via SPOs than in 2020 but it still exceeded the 2015‑19 average and they ranked second in Asia. Notably, companies from Hong Kong (China) and Korea doubled their proceeds in 2021 compared to 2020. Similarly, Thai companies raised significant amounts of capital in 2021, totalling USD 12.5 billion, four times more than in 2020.
Figure 2.8. Secondary public offerings by Asian non-financial companies
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Source: OECD Capital Market Series dataset, see Annex for details.
Globally, as well as in Asia, the healthcare, industrials, technology and consumer cyclicals industries together accounted for almost 70% of all SPO proceeds in 2020 (Figure 2.9). In Asia, the top industries in terms of SPOs were industrials and consumer cyclicals, representing 24% and 16% of all SPO proceeds respectively. In advanced Asia, 35% of the proceeds were raised by industrials and 20% by telecommunications services. In emerging and developing Asia (excluding China), almost one‑third of the proceeds were collected by energy companies. In China, four industries representing around 20% each were dominant, namely consumer cyclicals, industrials, healthcare and technology. Industrials and technology companies dominated secondary offerings in ASEAN economies, accounting for 42% and 20% of the proceeds raised in 2020, respectively.
In 2021, the distribution of SPOs across industries was similar to 2020 both in Asia and globally, with a slight decrease of healthcare companies and an increase of consumer cyclicals. In advanced Asia, industrial companies continued to dominate SPOs, representing 32% of total proceeds, and technology companies followed with 20%. Consumer cyclical companies accounted for 41% of the proceeds raised via SPOs in emerging and developing Asia (excluding China) in 2021, against only 8% in 2020. Healthcare companies in China raised 20% of the total proceeds in 2020 and 13% in 2021, and telecommunications companies increased from 4% in 2020 to 14% in 2021. In ASEAN economies, consumer cyclicals companies raised 45% of total SPO proceeds.
Figure 2.9. SPOs by non-financial companies by industry
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Source: OECD Capital Market Series dataset, see Annex for details.
In 2020, Japanese SPOs were mostly conducted by telecommunications (35%) and basic materials (27%) companies (Figure 2.10). The distribution changed drastically in 2021, with industrials and technology company secondary offerings dominating and raising 42% and 38% of the proceeds, respectively. While in 2020 SPOs by industrials companies from Hong Kong (China) were the most important, in 2021, 43% of the proceeds were collected by telecommunications services. Remarkably, in Korea, SPOs by industrials were important in 2020 and 2021, with 51% and 41% of the proceeds raised, respectively. In India, the energy (34%) industry was important in terms of SPOs in 2020. 2021 saw a shift in the distribution with industrials and telecommunications each accounting for almost 30%. Although utilities accounted for 39% of the proceeds raised in Thailand in 2020, in 2021, 86% of the funds were raised by consumer cyclicals.
Figure 2.10. SPOs by non-financial companies by jurisdiction and industry
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Source: OECD Capital Market Series dataset, see Annex for details.
2.1.2. Corporate bond markets
In March 2020, as the pandemic picked up pace and lockdowns began to be implemented, economic uncertainty increased sharply and companies started to face liquidity problems. In search of capital, many companies turned to the corporate bond market. In addition to meeting their immediate cash flow obligations, companies also aimed to build cushions for future economic uncertainty. Importantly, secondary corporate bond markets experienced a few weeks of disruption at the onset of the pandemic. However, central banks and governments interventions eased the pressure on the financial system improving secondary market liquidity and allowing global issuance activity to ramp up quickly in March (BIS, 2020[17]).
Following the outbreak of the COVID‑19 crisis, corporate bonds represented a significant source of capital for the non-financial corporate sector. In 2020 and 2021, global bond issuances by non-financial companies reached a historical peak of USD 2.9 trillion and USD 2.5 trillion, resulting in an all‑time high of USD 15.3 trillion in outstanding non‑financial corporate bonds at the end of 2021. Notably, one‑third of the total global amount was raised by Asian non-financial companies in 2020 and 39% in 2021. The total outstanding amount in non‑financial corporate bonds issued by Asian companies reached USD 3.8 trillion in 2021, almost one‑fourth of the global outstanding amount.
During the first two months of 2020, bond issuance by non‑financial companies across regions remained in line with their monthly averages over the 2015‑19 period (Figure 2.11). In April 2020, global corporate bond issuance peaked at USD 410 billion, two and a half times the previous five-year average. The increase was mainly driven by US non‑financial companies who issued an unprecedented amount of USD 222 billion in April, almost five times the previous five-year average (OECD, 2021[2]). During the same month, Asian corporate bond issuances also peaked at USD 105 billion, of which almost 74% were issued by companies from China, while only 6% were issued by companies from other jurisdictions in emerging and developing Asia. Corporate bond issuances in advanced Asia were more stable during 2020, although still above historical averages, with issuance peaking in June at almost three times the historical averages. In July, September and October, issuance in advanced Asian jurisdictions was also high compared to five‑year averages. Throughout 2020, with the exception of March and November, issuance in emerging and developing Asian jurisdictions was higher than historical averages. Notably, corporate bond issuances by Chinese non‑financial companies make up on average 90% of total issuance in emerging and developing Asia. Corporate bond issuance by companies in ASEAN economies halved in March 2020 compared to the previous five-year average. Issuances by ASEAN corporations saw a peak in June 2020 with USD 6.8 billion, three times the previous five-year average.
The use of corporate bonds by Asian non-financial companies was also strong in 2021. In several months non-financial corporate bond issuances were significantly higher than in 2020 (Figure 2.11). This increase was mainly driven by bonds issued by Chinese companies. In particular, in November and December 2021, Chinese non-financial companies issued 65% and 78% in excess of the previous five‑year respective averages. In 2021, companies in ASEAN economies issued more bonds compared to their previous five-year averages in all but three months.
Figure 2.11. Monthly corporate bond issuance by non-financial companies
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Source: OECD Capital Market Series dataset, see Annex for details.
A more detailed analysis of issuances shows important trends and differences across Asian jurisdictions. Corporate bond issuances by Chinese, Japanese and Korean non-financial companies together accounted for almost 90% of all Asian issuances in 2020, and were significantly higher than the previous five‑year average (Figure 2.12). While having comparatively smaller corporate bond markets, Cambodian and Chinese Taipei companies significantly increased the issuance of corporate bonds, reaching almost six times and three times the previous five‑year averages, respectively. Similarly, corporate bond issuances almost doubled in Indonesia, the Philippines and Viet Nam. In India and Singapore the increase was relatively moderate at around 30% above their previous five-year average. The use of corporate bonds by non‑financial companies from Malaysia, on the other hand, remained lower than historical averages. Non‑financial companies from Mongolia and Sri Lanka did not issue corporate bonds in 2020 (although they did over 2015‑19). In 2021, non-financial companies from China, Korea, Malaysia, Chinese Taipei, Thailand and Viet Nam issued higher capital via corporate bonds than they did in 2020. Importantly, for the first time in the last seven years, non-financial companies from Pakistan issued corporate bonds.
Figure 2.12. Asian non-financial corporate bond issuance by jurisdiction
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Source: OECD Capital Market Series dataset, see Annex for details.
Figure 2.13. Asian non-financial corporate bond issuance by credit quality
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Source: OECD Capital Market Series dataset, see Annex for details.
Although, overall, corporate bond markets continued to finance companies during the crisis (Figure 2.11), a look at issuance by credit ratings underlines some important differences (Figure 2.13). As would be expected, Asian companies with investment grade ratings were impacted by the crisis to a lesser extent than non‑investment grade issuers. Total issuance by non‑investment grade Asian companies decreased sharply between February and May 2020, and did not increase significantly during the rest of the year. Notably, BBB rated issuances were more than five times higher than their five-year averages in June, September and October. During 2021, issuances by non-investment grade Asian companies reverted their five-year averages in seven months, and in some months exceeded them. In particular, in June 2021, issuances totalled USD 15 billion, almost five times the five-year average issuance amounts. In line with the overall increase in Asian corporate bond issuances in 2021, higher rated investment grade issuances (A or higher) saw an increase during 2021.
With respect to the industry distribution of corporate bond issuance in Asia, Figure 2.14 shows that all industries continued to access the bond market in 2020 and issuances surpassed five-year averages for all industries except for telecommunications. Industrials, energy and utilities companies issued considerable amounts in 2020. Issuances by basic materials and healthcare companies were more in line with historical averages.
Basic materials, consumer cyclicals, energy and healthcare companies issued fewer corporate bonds in 2021 than in 2020. Healthcare companies issue significantly less than in previous years. As shown in the following section, the impact of the COVID‑19 crisis on aggregate sales was particularly strong in some industries, such as consumer cyclicals, energy and industrials, while the only industry with positive sales throughout 2020 was the healthcare industry (Figure 2.14). Therefore, healthcare companies did not need to issue capital via corporate bonds in 2020 and 2021. On the contrary, industrials and utilities companies continued issuing high amounts in 2021. The capital raised via corporate bonds by these industries was 42% and 6% higher than their total for 2020.
Figure 2.14. Asian non-financial corporate bond issuance by industry
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Source: OECD Capital Market Series dataset, see Annex for details.
2.2. The impact of the COVID‑19 crisis on corporate sales
In 2020, the pandemic and restrictions introduced to tackle it led to a global economic crisis. As a result, most economies and industries experienced a dramatic drop in sales. Globally, the sales of the 10 000 largest non‑financial listed companies dropped 4% in the first quarter of 2020 compared to the same period in 2019, 16% in the second quarter, and 5% in the third quarter (Figure 2.15). During the first quarter, listed companies in the United States were the only group of companies that did not experience a drop in sales, while in Asia and Europe sales dropped by 7% and 8%, respectively. Listed companies in Europe saw a severe contraction in sales (27%) during the second quarter.
Markets in Asia experienced various levels of contraction in sales. China was the first economy to be hit by the pandemic and experienced a decrease of 11% in the first quarter of 2020. In other Asian markets, sales dropped significantly in the second quarter. All Asian markets shown in Figure 2.15 experienced a two‑digit drop except China and the rest of Asia group. Sales of listed corporations decreased by 40% in India, 20% in Korea, 18% in Japan and 21% in ASEAN.
Sales recovered globally in the third and fourth quarters of 2020, and in the fourth quarter aggregate sales increased slightly by 3%. In Asia and the United States, listed corporations recorded a 5% increase in sales, while the European corporate sector still experienced a 1% decline. It is worth mentioning that among all markets, China and the rest of Asia group saw the most vibrant recoveries, with both regions recording a 15% increase in the fourth quarter compared to 2019.
The impact of the pandemic on corporate sales lessened in 2021, with the aggregate sales of the 10 000 largest companies recovering consistently. At the global level, the first three‑quarters of 2021 saw double‑digit growth compared to the corresponding quarters in 2019, indicating a strong economic recovery. However, the recovery has been uneven. While the corporate sector in Asia and the United States have experienced an average increase of 15%, listed corporations in Europe have seen much smaller increases.
Asia also experienced an unbalanced recovery. Chinese corporations have seen the strongest growth, at over 30% in each quarter of 2021. The rest of Asia group experienced a similar strong recovery, with companies in Chinese Taipei recovering particularly strongly. Meanwhile, the performance of the Japanese corporate sector has been sluggish. The first quarter of 2021 saw a 3% increase in sales but they fell in the two following quarters. Listed corporations in Korea had a robust recovery, recording sales growth of 12%, 8% and 17% for the first three‑quarters of 2021, respectively.
Figure 2.15. The COVID‑19 crisis’ impact on sales of listed corporations by economy/region
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Note: The figure reports the changes in sales between each quarter on the top row and the corresponding 2019 quarter. Sales in the figure are aggregated by economy/region using the revenues reported by companies in the interim quarterly reports. The analysis covers the largest 10 000 non-financial listed companies worldwide.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
The impact of the COVID‑19 crisis on aggregate sales was particularly severe in some industries, such as consumer cyclicals, energy and industrials. As shown in Figure 2.16, the energy industry experienced a contraction of almost 40% in sales during the second quarter of 2020, followed by a 26% and 15% decline in the third and fourth quarters, respectively. Despite the recovery in 2021, the sales of energy companies only grew in the third quarter (15%). Consumer cyclicals also witnessed significant 13% and 25% declines in sales during the first and second quarters of 2020, respectively. Meanwhile, consumer non‑cyclicals corporations experienced a modest fall during the second quarter of 2020, and sales of technology and healthcare companies remained almost unchanged. Starting from the third quarter of 2020, these three industries began to see robust sales growth, which became even stronger in 2021 with double‑digit growth in almost all quarters. It is also worth mentioning that basic materials companies showed the most significant sales increase in 2021, largely driven by the surge in commodity prices.
Figure 2.16. The COVID‑19 crisis’ impact on sales of listed companies by industry in Asia
![](/adobe/dynamicmedia/deliver/dm-aid--63a6bece-8834-4ee9-a031-dca57116723b/image61.png?quality=80&preferwebp=true)
Note: The figure reports the changes in sales between each quarter on the top row and the corresponding 2019 quarter. Sales in the figure are aggregated by industry using the revenues reported by companies in the interim quarterly reports. The analysis covers the largest 10 000 non‑financial listed companies worldwide.
Source: OECD Capital Market Series dataset, Thomson Reuters Datastream, see Annex for details.
2.3. Government support programmes and regulatory measures in Asian economies
The COVID‑19 crisis has put many companies and entire industries under severe financial pressure. As a consequence of extraordinary circumstances beyond their control, otherwise sound businesses often found it difficult to meet their obligations, for example with respect to payments and disclosure. To help them navigate the crisis, all economies adopted a range of measures spanning from regulatory adjustments to both indirect and direct financial support. Government support has been crucial and underpinned the recovery from the crisis. Appropriately, such support measures have been and continue to be large. Companies themselves have also put in place measures to cope with the situation and to respond to demands from shareholders and stakeholders.
Several of these measures were temporary in nature and introduced for the purpose of mitigating the immediate impact of the crisis. However, some of these measures may also have a long-term and lasting impact on how companies are governed, their capital and ownership structures and how they manage their relationships with shareholders and stakeholders. Certain measures may also affect the day‑to‑day activities of companies with respect to corporate reporting practices and the procedures for decision‑making, including shareholder meetings.
This section provides an overview of regulatory and financial support measures related to corporate governance and corporate finance, focusing on large companies (and not directly targeted at SMEs). The information is summarised in a set of tables and the commentary illustrates different approaches to support measures and related initiatives. It is important to note that, as circumstances evolve, economies continue to consider adjustments of policies and regulations.
2.3.1. Government support programmes
Governments have implemented a large range of measures to support the corporate sector during the crisis. Some have provided general support whereas others have focused their efforts on the most affected industries. These measures are classified as either indirect or direct support measures.
Indirect measures
The majority of indirect measures have aimed to alleviate and ease the liquidity needs of corporations. To this end, authorities have notably provided payment deferral for tax obligations or simply lowered tax ratios. For example, a large number of jurisdictions introduced a deferral or reduction in corporate income taxes. Indonesia implemented permanent reductions of the corporate income tax (CIT) rate from 25% to 22% in 2020‑21 and 20% starting in 2022. Viet Nam cut CIT for 2020 by 30% for all business with revenue below a certain threshold, and extended the payment deadline for CIT by five months. The Philippines reduced the CIT rate from 30% to 25% effective beginning July 2020 followed by a 1% annual reduction beginning January 2023 until the rate is reduced to 20% beginning January 2027. Singapore granted a CIT rebate of 25%, capped at SGD 15 000 (Singapore dollar), equivalent to USD 10 700 for 2020, and an automatic extension of interest‑free instalments of two months for payment of CIT. In Chinese Taipei, higher deductions for certain salary expenses were allowed for CIT purposes.
Economies implemented a variety of other tax support measures. Some accelerated VAT refunds. For example, Indonesia accelerated VAT refunds in 19 manufacturing sectors, and Pakistan’s relief measures included PKR 100 billion accelerated tax refunds to export industries. Some jurisdictions implemented measures to facilitate late tax payment. For example, Malaysia allocated RM 2.4 billion to ease financial stress on businesses through remissions of penalties related to late payment, and in Chinese Taipei, companies facing difficulties to settle tax payments could request a payment extension or payment plan. Chinese Taipei also exempted subsidies offered by the authorities to enterprises from income tax. Singapore expanded the Double Tax Deduction for Internationalization (DTDi) scheme by including new categories of expenses.
Many economies also supported companies through measures targeting social security contributions. Some cut contributions. In China, social insurance payments were cut by RMB 1 trillion (Renminbi) to incentivise companies to retain employees and RMB 4 trillion were allocated to cover payment relief for enterprises of their contributions to social security schemes. In Thailand, the rate of social security contribution was temporarily reduced to 4% of each employee’s monthly salary under a certain threshold. And in India, the government paid the employee provident fund contribution both of the employee and employer of companies above a certain number of employees and salary average.
Other economies have allowed the deferment of social contribution payments. In the Philippines, the Contribution Condonation Penalty Programme allowed employers to pay overdue contributions in full or by instalment over 4 to 24 months without penalty. In Malaysia, employers were allowed to defer payments and to restructure and reschedule their contributions to the Employees Provident Fund. In Chinese Taipei, companies were allowed to defer labour insurance premium and pension payments without penalty, and in Viet Nam affected companies were allowed to defer contributions to the pension fund by up to three months without interest penalty. Cambodia also allowed the deferral of compulsory payments to the Social Security Fund in some sectors during the period of business suspension, and Mongolia’s support included both an exemption on social insurance and a social insurance penalty exemption.
Some economies have also used subsidies to support companies. These subsidies have included support with utility and rent payments to facilitate business continuity. Hong Kong (China), Indonesia, Malaysia and Viet Nam, for example, reduced electricity payments. In Malaysia, tiered discounts of between 15% to 50% on electricity bills were provided to businesses for monthly consumption of up to certain level. In Hong Kong (China), a subsidy was allocated to eligible non-residential account holders to cover 75% of their monthly electricity subject to a monthly cap. Viet Nam also cut electricity tariffs to support firms affected by COVID‑19, and Indonesia included vulnerable commercial sectors in its electricity bill relief subsidy.
Jurisdictions have also provided support for rent payments; they include Hong Kong (China), Indonesia, Japan, Malaysia and the Philippines. Hong Kong (China) provided rental concessions for eligible tenants of government properties and full rental waivers for businesses that had to completely cease operations due to anti‑epidemic measures during the closure period. Japan’s second FY2020 draft supplementary budget included subsidies to affected firms for their rent payments. In Malaysia, the government provided a special tax deduction to any company that provided a reduction of rental on business premises of at least 30%, and the Philippines implemented a minimum 30‑day grace period on commercial rents of leases not permitted to work. Indonesia decreased lease charges on state‑owned property for certain business and Singapore’s support to businesses also included rental relief for commercial properties. In Mongolia, support to vulnerable businesses included both a rental relief and a write‑off of payments of utility bills (electricity, heat, water and waste bills).
Table 2.1. Indirect measures in response to COVID‑19
|
Corporate income tax (deferral or lowering) |
Social security contributions (deferral, waiver or lowering) |
Rent and utility subsidies |
Wage subsidies |
---|---|---|---|---|
Bangladesh |
○ |
● |
○ |
● |
Cambodia |
● |
● |
○ |
● |
China |
● |
● |
○ |
○ |
Hong Kong (China) |
○ |
○ |
● |
● |
India |
● |
● |
○ |
○ |
Indonesia |
● |
● |
● |
○ |
Japan |
● |
● |
● |
○ |
Korea |
● |
● |
○ |
○ |
Malaysia |
● |
● |
● |
● |
Mongolia |
● |
● |
● |
○ |
Pakistan |
○ |
○ |
● |
● |
Philippines |
● |
● |
● |
● |
Singapore |
● |
○ |
● |
● |
Sri Lanka |
● |
○ |
● |
● |
Chinese Taipei |
● |
● |
○ |
○ |
Thailand |
● |
● |
● |
○ |
Viet Nam |
● |
● |
● |
○ |
Source: ADB (2021[18]), ADB COVID‑19 Policy Database, https://COVID-19policy.adb.org/; IMF (2021[19]), IMF Policy Responses to COVID‑19, https://www.imf.org/en/Topics/imf-and-COVID-19/Policy-Responses-to-COVID-19; KPMG (2020[20]), KPMG government Response – Global landscape:, https://home.kpmg/xx/en/home/insights/2020/04/government-response-global-landscape.html; IIF (2022[21]) IIF COVID‑19 Global Policy Response Summary, https://www.iif.com/COVID-19; EY (2021[22]), EY Tax COVID‑19 Response Tracker, https://www.ey.com/en_gl/tax/how-COVID-19-is-causing-governments-to-adopt-economic-stimulus-.
A number of economies have also supported business through wage subsidies. Malaysia introduced a Wage Subsidy Programme allowing employers to apply for staff wages subsidy of up to RM 1 200 (Malaysian ringgit) per employee for three months, under a number of conditions. Bangladesh set up a Special Fund for Salary support for export oriented manufacturing industry workers. The State Bank of Pakistan enhanced its refinance limit to finance up to 100% of wages and salaries of businesses with average three‑month bill of up to PKR 500 million (Pakistani rupee). In Hong Kong (China), the Employment Support Scheme of HKD 80 billion (Hong Kong dollar) provided wage subsidies to eligible employers to retain their employees. In Singapore, the Jobs Support Scheme provided cash grants of up to the first SGD 4 600 gross monthly salary for each local employee to employers in certain industries.
Direct measures
Governments have also provided different types of direct support to companies. The most common measures have been loans and government loan guarantees. Concerning loans, Korea, for example, created a Corporate Bond-Backed Lending Facility as a lending scheme providing KRW 10 trillion (South Korean won) in loans to businesses (and banks and non-bank financial institutions). Korea also provided KRW 1.65 trillion in loans by policy banks as part of a financial aid package for the auto industry consisting of KRW 175 billion in loans and KRW 1 trillion in working capital loans with preferential interest rates for subcontractors. In Singapore, government support included a side loan capital of SGD 22 billion to help businesses facing cash flow challenges with loan obligations and insurance premium payments, as well as a SGD 4 billion bridge loan facility to Singapore Airlines (SIA). Thailand and Viet Nam also provided loans to their flag carriers. In Sri Lanka, the Saubagya COVID‑19 Renaissance Facility provides a 4% working capital loan for two years (with 6‑month debt moratorium) to large enterprises in affected sectors through a re‑financing facility by the Central Bank.
Many jurisdictions have also provided loan guarantees. In Hong Kong (China), key measures to provide financial relief included enhancing the 80 and 90% government guarantee products by raising the maximum loan amount, providing interest subsidy, and extending the eligibility coverage to listed firms. Malaysia set up a RM 50 billion fund for working capital loan guarantees for all COVID‑19 affected businesses, and India’s support measures included a collateral-free lending programme with 100% guarantee. In the Philippines, the second stimulus package, “Bayanihan II”, included equity to the Philippine Guarantee Corporation for its credit guarantee programmes in support of large companies, and the Central Bank assigned zero weight risk to loan exposures guaranteed by the Guarantee Corporation. In Japan, the Financial Services Agency allowed banks to assign zero risk weights to loans guaranteed with public guarantee schemes. Other examples include Indonesia where the Central Bank guaranteed working capital loans for labour intensive corporations, Cambodia where the government provided credit guarantee for business through the Business Recovery Guarantee Scheme, and Thailand where measures designed to support and transform viable businesses for the post COVID‑19 world included a special loan facility for business with a credit guarantee scheme.
Some economies also introduced measures regarding loan classification and loan restructuring. In Thailand, debt restructuring measures included the extension of the loan repayment period, provision of additional working capital, interest rate reduction, and/or the extension of the loan’s maturity with lower interest rates that match an expected declining post-pandemic income profile. The State Bank of Vietnam issued guidelines to commercial banks to reschedule loans, reduce/exempt interest, and provide loan forbearance. The National Bank of Cambodia also issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics). The Central Bank of Malaysia implemented measures temporarily easing regulatory and supervisory compliance on banks to enable them to support loan deferment and restructuring, and Indonesia’s Financial Services Authority relaxed loan classification and loan restructuring procedures for banks to encourage loan restructuring. China increased tolerance for higher NPLs for loans by epidemic-hit sectors and reduced NPL provision coverage requirements.
Another type of support was grants. The Monetary Authority of Singapore (MAS), AMTD Group and AMTD Foundation provided a SGD 6 million grant to support Singapore‑based FinTech firms. In Indonesia, stimulus packages comprised grants for hard-hit enterprises in tourism and creative industries, and Hong Kong (China) also provided relief grants for hard‑hit sectors.
Some economies also established funds or increased the amount available in existing funds in order to buy securities issued by companies. The Bank of Japan (BoJ) increased its annual pace of purchases of Exchange Traded Funds (ETFs) and Japan-Real Estate Investment Trusts (J-REITs) up to about JPY 12 trillion (Japanese yen), equivalent to 2.2% of GDP, and JPY 180 billion (0.03% of GDP), respectively. The BoJ also dropped from the policy statement its reference to a JPY 6 trillion target for annual purchases of ETFs, while keeping the upper limit of about JPY 12 trillion, and announced that it would conduct purchases of assets such as ETFs with greater flexibly.
In Korea, the government set up a bond market stabilisation fund to purchase corporate bonds, commercial papers and financial bonds, and created a special purpose vehicle (SPV) to purchase corporate bonds and commercial papers. Korea also set up an equity market stabilisation fund (KRW 10.7 trillion) financed by financial holding companies, leading financial companies, and other relevant institutions, to invest in companies in the KOSPI 200 index. In Thailand, the Thai Bankers’ Association, Government Savings Bank, insurance companies and Government Pension Fund established together a Corporate Bond Stabilisation Fund (BSF) to inject liquidity via bond rollover by providing bridge financing of up to THB 400 billion (Thai baht) to high‑quality firms with bonds maturing during 2020‑21, at higher‑than‑market ‘penalty’ rates. Malaysia, as part of its Short-term National Economic Recovery Plan (PENJANA), created an investment fund, amounting to MYR 1.2 billion (Malaysian ringgit), to match institutional private capital investment with selected venture capital and early stage tech fund managers.
In some cases economies decided to inject capital into affected corporations. For example, Indonesia’s national economic recovery programme included capital injections into state‑owned enterprises. In other cases, capital injections targeted certain strategic companies, including airlines. State‑owned Korea Development Bank invested KRW 800 billion into the parent company of Korean Air Lines to help fund its takeover of Asiana Airlines. Singapore’s SGD 19 billion rescue package for SIA included SGD 5.3 billion in equity. In Indonesia, Garuda issued IDR 8.5 trillion in 7‑year mandatory convertible bonds to be purchased by a state‑owned investment firm as part of the government’s rescue plan for the airline. In Hong Kong (China), the government invested HKD 27.3 billion in Cathay Pacific through the Land Fund, which notably comprised preference shares with detachable warrants. The rescue plan for Vietnam Airlines included the issuance of VND 8 trillion (Vietnamese dong) in new shares (of which 85% will be purchased by the government’s holding company, State Capital Investment Corp.).
Support to the airline industry extended beyond capital injections. The rescue package for SIA also included SGD 9.7 billion convertible note portions of SIA’s fundraising underwritten by state‑investor Temasek Holdings, as well as a SGD 4 billion bridge loan facility from DBS Bank. The rescue package for Vietnam Airlines also included a VND 4 trillion soft loan. The Vietnamese Government also provided loan guarantees to some aviation businesses and a discount on fees and services for domestic flights. In China, ten major air transport companies received RMB 17 billion of special bailout funds from the Export-Import Bank of China, the funding mechanism established at the beginning of 2020 to support companies stricken by COVID‑19 and trade frictions with a focus on sectors related to foreign trade and manufacturing. In Cambodia, all airlines registered locally were temporarily exempted from minimum tax and were allowed to delay the payment of aviation fees, and in the Philippines, airport fees for domestic carriers were temporarily waived.
Many economies put in place targeted measures to support a large range of key industries beyond airlines. In India, for example, the Production Linked Incentive scheme targets 13 priority sectors (and is expected to cost about 0.8% of GDP over five years), and the Emergency Credit Line Guarantee scheme provides liquidity support to 26 stressed sectors by providing collateral free and 100% guaranteed loans. In Korea, a key industry stabilisation fund established for KRW 40 trillion (2.1% of GDP) and operated by Korea Development Bank was set up to support seven key industries (airlines, shipping, shipbuilding, autos, general machinery, electric power and communications). In Bangladesh, the Ministry of Finance implemented a BDT 50 billion (Bangladeshi taka) (USD 588 million) stimulus package for exporting industries channelled through Bangladesh Bank and distributed by the commercial banks at a 2% service charge. The State Bank of Vietnam asked credit institutions to channel credit to five priority sectors.
Many Asian economies have also provided a large range of support to the tourism industry, a vital industry for many of them and one of the hardest hit by the crisis. In Cambodia, for example, businesses in a number of provinces and cities were exempted from monthly tax payments and allowed to defer monthly instalment of annual tax on income liability, and funding was allocated for wage subsidies and training programmes for suspended workers in the sector. In addition, the National Bank of Cambodia issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) from the sector (and four others). In Sri Lanka, under the government’s post COVID‑19 relief budget, a 4% interest five-year loan with a two‑year grace period was made available to companies registered under the Sri Lanka Tourism Development Association to pay salaries of staff. In Indonesia and Malaysia, recovery measures for the tourism sector notably comprised tax reliefs.
Table 2.2. Direct measures in response to COVID‑19
Loans and loan guarantees |
Subsidies |
Capital injections |
Business support fund |
Industry targeted measures |
Tourism sector support |
Aviation sector support |
Environment & digitalisation support |
|
---|---|---|---|---|---|---|---|---|
Bangladesh |
● |
● |
○ |
○ |
○ |
○ |
○ |
○ |
Cambodia |
● |
● |
○ |
○ |
● |
● |
● |
○ |
China |
● |
● |
● |
○ |
● |
● |
● |
○ |
Hong Kong (China) |
● |
● |
● |
○ |
● |
● |
● |
● |
India |
● |
● |
● |
○ |
● |
● |
○ |
○ |
Indonesia |
● |
● |
● |
○ |
● |
● |
● |
● |
Japan |
● |
● |
● |
● |
● |
● |
○ |
● |
Korea |
● |
○ |
● |
● |
● |
● |
● |
● |
Malaysia |
● |
● |
● |
● |
● |
● |
○ |
● |
Mongolia |
● |
● |
○ |
○ |
● |
○ |
○ |
○ |
Pakistan |
● |
● |
○ |
○ |
● |
○ |
○ |
○ |
Philippines |
● |
● |
○ |
○ |
● |
● |
● |
○ |
Singapore |
● |
● |
● |
○ |
● |
● |
● |
● |
Sri Lanka |
● |
● |
○ |
○ |
● |
● |
○ |
○ |
Taipei |
○ |
● |
● |
○ |
● |
○ |
○ |
○ |
Thailand |
● |
● |
○ |
● |
● |
● |
● |
○ |
Viet Nam |
● |
● |
● |
○ |
● |
○ |
● |
○ |
Source: ADB (2021[18]), ADB COVID‑19 Policy Database, https://COVID-19policy.adb.org/; IMF (2021[19]), IMF Policy Responses to COVID‑19, https://www.imf.org/en/Topics/imf-and-COVID-19/Policy-Responses-to-COVID-19; KPMG (2020[20]), KPMG government Response – Global landscape:, https://home.kpmg/xx/en/home/insights/2020/04/government-response-global-landscape.html; IIF (2022[21]) IIF COVID‑19 Global Policy Response Summary, https://www.iif.com/COVID-19; EY (2021[22]), EY Tax COVID‑19 Response Tracker, https://www.ey.com/en_gl/tax/how-COVID-19-is-causing-governments-to-adopt-economic-stimulus-.
Economies have also used their direct support to businesses to promote specific objectives, for example with respect to the environment and digitalisation. Japan’s Comprehensive Economic Measures to Secure People’s Lives and Livelihoods toward Relief and Hope, worth JPY 73.6 trillion (13% of 2019 GDP), includes incentives for firms to invest in digitalisation and green technologies. Korea’s recovery plan, the “Korean New Deal”, includes a Digital New Deal pillar and a Green New Deal pillar. The Monetary Authority of Singapore announced in April 2020 a SGD 125 million support package funded by the Financial Sector Development Fund to sustain and strengthen financial services and FinTech capabilities, and in May 2020, the MAS and AMTD Group and AMTD Foundation made a SGD 6 million grant to support Singapore‑based FinTech firms. Hong Kong (China) introduced a “Distance Programme” under the Anti‑epidemic Fund to help businesses fund technology solutions and purchases, and Indonesia took measures to further strengthen financial deepening and access to financial services by facilitating collaboration between the banking industry and Fintech companies.
2.3.2. Regulatory measures
Annual general meeting
Listed companies are typically required to hold an annual general meeting within three to six months after the end of their financial year. With restrictions on social gatherings, border controls and travel restrictions, 2020 annual general meetings (AGMs) were either delayed or held in different formats. The most common measure has been for public authorities to temporarily allow companies to hold shareholder meetings through remote participation, even in cases where there is a legal provision stating that the company bylaw should have authorised the remote participation.
For example, Indonesia’s Financial Services Authority extended the deadline by two months for publicly listed companies to hold annual shareholders meetings. The Bangladesh Securities and Exchange Commission (BSEC) also relaxed the requirements to hold annual and extraordinary general meetings (and board meetings) and allowed companies to use any digital means for holding meetings. In Singapore, an alternative arrangement through electronic means was authorised even where personal attendance (e.g. AGM, board of directors meeting) is required by law. In Thailand, the government removed certain limitations on electronic meetings, including a rule that required that at least one‑third of the quorum be present in the same location in Thailand.
Disclosure practices
Some jurisdictions also made changes concerning requirements for the release of quarterly and annual financial reports and related accounting documents. Indonesia’s Financial Services Authority extended the deadline for the release of annual financial reports by two months and the Companies Commission of Malaysia extended the deadline by three months. In the Philippines the deadline was extended by 60 calendar days. China also introduced a financial reporting extension for companies severely affected by the pandemic, and Korea lifted administrative sanctions and granted a 30‑day extension on the reporting deadline to companies that applied for sanctions exemptions due to pandemic-related disruptions.
Some economies also introduced new requirements to disclose material facts, guidance and estimates related to COVID‑19 risks. For instance, in India, issuers were required to incorporate a quantitative and qualitative description of the main COVID‑19 related risks and uncertainties to which they are exposed, and the potential measures taken to mitigate economic exposure to the pandemic. Japan established working groups addressing the COVID‑19 implications in reporting and auditing to support stakeholders’ engagement and ensure proper information sharing.
Limits on foreign ownership
As some companies have experienced price distortions and significant declines in their valuations, they have become vulnerable to unsolicited foreign takeovers. There has also been concerns about non‑domestic ownership in sectors critical for the response to and recovery from the crisis, in particular health‑related industries and associated supply chains. Several economies already had mechanisms to protect certain domestic strategic assets from foreign acquisition before the crisis. As a response to it, a number have adjusted their screening mechanisms and control rules for foreign direct investments (FDI) in order to prevent potential acquisitions of strategic assets.
Japan lowered the value of deals that triggers FDI reviewing mechanisms and modified further the associated procedural rules. India broadened the list of countries by mandating government approval for all FDI inflows from countries that share land borders with India. Conversely, for debt investments, China has instead moved towards allowing more foreign investment, lifting the restriction on foreign debt quotas that normally apply to Chinese enterprises in order to enhance liquidity.
Access to capital markets
Capital markets play a critical role in linking companies seeking capital and investors supplying it, in helping alleviate fiscal pressure on governments, in complementing bank lending, and in supporting monetary policy actions. As a result, a number of economies implemented initiatives aimed at facilitating the use of both debt and equity capital markets.
India implemented a wide range of measures to ease access to capital. The Securities and Exchange Board of India (SEBI) temporarily eased the requirements for rights issues with regard to market capitalisation, from INR 2.5 billion to INR 1 billion (Indian rupee), as well as the minimum listing period (from 3 years to 18 months) and the minimum subscription share of the total offer required (from 90% to 75%). Companies were also permitted to list securities directly in foreign jurisdictions, and private companies listing debt securities on the stock exchange were not to be regarded as listed companies. SEBI also temporarily relaxed the norms related to broker and filing fees for rights issues, public issues and share buybacks.
Other jurisdictions also implemented a wide range of measures to ease access to capital markets. The China Securities Regulatory Commission (CSRC) removed the minimum requirement for profitability and leverage, and relaxed the pricing framework required to do secondary equity offerings aiming to facilitate capital access to listed companies. The Securities Commission Malaysia and Bursa Malaysia waived annual licensing fees for capital market licensed entities and put in place regulatory relief measures for public listed companies. Indonesia’s Financial Services Authority introduced a new share buyback policy allowing listed companies to repurchase their shares without a prior shareholders’ meeting and introduced limits on stock price declines. The Philippines amended the Tax Code to eliminate the tax on the sale, barter or exchange of shares of stock listed and traded through initial public offering. Viet Nam temporarily reduced by 50% the rates, fees and charges in the securities industry, banks and non‑bank credit institutions to support those affected by the pandemic. The Bank of Korea created a lending programme to non‑banks with corporate bonds as collateral.
Some economies also implemented measures to ease bond issuance. For example, the Chinese National Development and Reform Commission (NDRC) launched a “Bond Issuance Optimisation Circular” to support the issuance of bonds to finance pandemic-related challenges, including rollover of old debt. Bond issuance procedures were also simplified, with an extended validity period of approval documents, and a COVID‑19 bond label was introduced, allowing for a faster registration process for bonds where at least 10% of the proceeds were used for pandemic containment and control measures. In Cambodia, the government, as part of measures to limit tightening in financial conditions, provided financing support via increased bond issuance by corporates, including by relaxing rules on insurers for bond investments.
Payout policy
To receive public support and ensure that corporations, in particular from the financial sector, had adequate capital buffers to withstand the crisis and continue their activities, many governments and regulators took measures to limit or stop payouts during the pandemic. Further, governments may require that companies that benefit from publicly funded support programmes use that money for certain purposes, e.g. to limit layoffs or to maintain investment. In some economies, such government support has also been made contingent on restrictions with regard to payout policies. While most economies took initiatives to restrict buybacks, some took measures to facilitate them during the crisis, with a view to providing liquidity for investors who may be dependent on such payouts. This includes India, Indonesia and Korea.
Measures to restrict payouts have primarily targeted financial institutions, banks in particular. The Bank of Thailand restricted dividend payments by financial institutions in June 2020 and removed the restriction in November 2020 with the condition that the distribution of dividends could not exceed either the previous year’s payout ratio nor half of the current year’s net profit. The Monetary Authority of Singapore called on locally incorporated banks headquartered in Singapore to cap their total dividends per share to 60% of the FY2019 level and offer shareholders the option to receive dividends as shares instead of cash, and urged finance companies incorporated in Singapore to also cap their total dividends per share for FY2020 at 60% of FY2019s level. The National Bank of Cambodia called for banks and financial institutions to suspend dividend payments for 2020, and Pakistan suspended bank dividends for the first two quarters of 2020. In Sri Lanka, commercial banks could not declare dividends, share buybacks or increased payments to directors until end‑2020. The State Bank of Vietnam instructed credit institutions to actively reduce bonuses and salaries and adjust business plans, including not paying dividend in cash. In Korea, the Financial Services Commission (FSC) recommended that banks temporarily limit dividends within 20% of their net profits to maintain their loss absorbing capacity.
Table 2.3. Selected regulatory measures in response to COVID‑19
AGM – deadline extension and/or permission to hold hybrid/virtual |
Disclosure -deadline extension for presentation of financial statements |
Payout - restrictions |
FDI screening – tightening of mechanism |
Capital markets – ease access |
|
---|---|---|---|---|---|
Bangladesh |
● |
● |
○ |
○ |
○ |
Cambodia |
○ |
○ |
● |
○ |
● |
China |
● |
● |
○ |
○ |
● |
Hong Kong (China) |
○ |
○ |
○ |
○ |
○ |
India |
● |
● |
○ |
● |
● |
Indonesia |
● |
● |
○ |
○ |
● |
Japan |
● |
● |
○ |
● |
○ |
Korea |
● |
● |
● |
○ |
● |
Malaysia |
○ |
● |
○ |
○ |
● |
Mongolia |
○ |
○ |
○ |
○ |
○ |
Pakistan |
○ |
○ |
● |
○ |
○ |
Philippines |
○ |
● |
○ |
○ |
● |
Singapore |
● |
○ |
● |
○ |
○ |
Chinese Taipei |
○ |
○ |
○ |
○ |
○ |
Thailand |
● |
● |
● |
○ |
○ |
Sri Lanka |
○ |
○ |
● |
○ |
○ |
Viet Nam |
○ |
○ |
● |
○ |
● |
Source: ADB (2021[18]), ADB COVID‑19 Policy Database, https://COVID-19policy.adb.org/; IMF (2021[19]), IMF Policy Responses to COVID‑19, https://www.imf.org/en/Topics/imf-and-COVID-19/Policy-Responses-to-COVID-19; KPMG (2020[20]), KPMG government Response – Global landscape:, https://home.kpmg/xx/en/home/insights/2020/04/government-response-global-landscape.html; IIF (2022[21]) IIF COVID‑19 Global Policy Response Summary, https://www.iif.com/COVID-19; EY (2021[22]), EY Tax COVID‑19 Response Tracker, https://www.ey.com/en_gl/tax/how-COVID-19-is-causing-governments-to-adopt-economic-stimulus-.
Insolvency frameworks
The widespread business distress caused by the COVID‑19 pandemic raised concerns globally about the risk of a significant increase in bankruptcies, possibly of fundamentally economically viable firms due to e.g. sharp but temporary revenue falls, supply chain issues or unfavourable conditions on financial markets. A sudden increase in corporate bankruptcies would also run the risk of causing congestion of courts with impacts on the functioning of the legal system. In order to minimise these issues, in addition to e.g. direct fiscal support many Asian jurisdictions (and others globally) implemented temporary regulatory measures related to their insolvency frameworks in response to the pandemic (Table 2.4).
Such measures included the increases in debt thresholds for initiating bankruptcy proceedings or timelines to respond to such requests; suspension to file for bankruptcy altogether; and temporary relief for directors from their duty to prevent insolvent trading. Compared to the group of (primarily G20 and OECD) countries presented in OECD (2021[2]), the group of Asian economies presented in Table 2.4 generally implemented fewer temporary measures related to insolvency. The most common measure in the broader group, suspension to file for bankruptcy/insolvency, was implemented in 23 out of 46 economies compared to only two out of 18 Asian economies. It bears mentioning that a large number of Asian jurisdictions (and indeed globally) also implemented debt moratoria (not shown in the table), temporarily postponing principal and/or interest payments which effectively amounts to a (temporary) limitation of bankruptcies, albeit not through insolvency regulation. In some economies these measures only applied to certain types of companies. For example, in Sri Lanka, a six‑month debt moratorium was extended to SMEs active within certain sectors.
Table 2.4. Insolvency and bankruptcy regulatory measures in response to COVID‑19
|
Extension of thresholds to respond / file bankruptcy / insolvency notice |
Suspension to file for bankruptcy / insolvency |
Temporary relief for directors from duty to prevent insolvent trading |
---|---|---|---|
Bangladesh |
○ |
○ |
○ |
Cambodia |
○ |
○ |
○ |
China |
○ |
○ |
○ |
Hong Kong (China) |
○ |
○ |
○ |
India |
● |
● |
○ |
Indonesia |
○ |
● |
○ |
Japan |
○ |
○ |
○ |
Korea |
● |
○ |
○ |
Malaysia |
● |
○ |
○ |
Mongolia |
○ |
○ |
○ |
Pakistan |
○ |
○ |
○ |
Philippines |
○ |
○ |
○ |
Singapore |
● |
○ |
● |
Sri Lanka |
○ |
○ |
○ |
Chinese Taipei |
○ |
○ |
○ |
Thailand |
○ |
○ |
○ |
Viet Nam |
○ |
○ |
○ |
Source: OECD (2021[2]), The Future of Corporate Governance in Capital Markets Following the COVID‑19 Crisis, https://doi.org/10.1787/efb2013c-en; Web search.