The administration of US President Donald Trump intends to put forward plans to invest about $54 billion from the strategic package pledged by South Korea, to finance a liquefied natural gas project in Alaska and other American projects, according to two sources familiar with the discussions.
The Alaska LNG project is at the forefront of the proposed projects. It includes constructing a pipeline to transport gas from the northern slope of the state to a liquefaction facility on the southern coast, before exporting it to Asian markets.
The company developing the project (Glenvarney) is seeking to secure additional agreements to purchase gas to secure the necessary financing, after it announced in March that it had obtained commitments to purchase 13 million tons annually. The Japanese "Jera" and "Tokyo Gas" also signed preliminary agreements to purchase two million tons annually combined if the project is implemented.
The Alaska LNG plan has faced challenges for years related to the project's cost, financing, and commercial feasibility. These aspects have also been subject to studies by the governments of South Korea and Japan, making potential Korean investment a new source of financing for the project.
Seoul and Washington are working to identify projects that can accommodate the $350 billion strategic investment package, which South Korea pledged as part of a trade agreement last year. Discussions include, in addition to the Alaska gas project, nuclear energy projects and a gas power plant in Texas.
Kim Sung-won, an opposition lawmaker and head of the Trade Committee in the South Korean Parliament, said that the National Assembly will scrutinize the profitability of American investment projects and the financial risks associated with them, in addition to the direct benefits to Korean companies.
He added that US investments should be designed to achieve mutual benefit, expand markets for Korean companies, and enhance the stability of energy supply chains.
Trump has repeatedly promoted the Alaska project as a way to increase US energy exports and strengthen relations with Washington's allies, including South Korea and Japan.
Global bond markets are heading to end September with one of their worst months in years, under the pressure of deteriorating government finances, the intensity of issuance and high inflation, at a time when the US-Israeli war with Iran has kept energy costs high.
On the other hand, stock markets showed greater ability to withstand the jump in bond yields, with optimism continuing in Asian markets on Wednesday.
US Treasury bond yields for 10 years settled near their highest levels since 2007 at 5.2383 percent, heading to rise by about 50 basis points during September, in their largest monthly increase in about two years. Bond yields move inversely to their prices.
Two-year US bond yields fell slightly to 4.8889 percent after comments by John Williams, head of the Federal Reserve in New York, that reduced expectations for tightening monetary policy sooner, but were still higher by more than 50 basis points during the month.
Charu Chanana, chief investment strategist at Saxo, said that the movement of yields “exceeds the repricing of the upcoming central bank meetings,” noting that the markets are moving towards a system in which yields are characterized by structurally higher levels.
She added that returning returns sustainably to the very low levels that investors have become accustomed to after the global financial crisis has become more difficult.
In Japan, bond yields are hovering near multi-decade highs, while 10-year government bond yields in Germany and France this week hit their highest levels in 17 and 18 years, respectively.
Stocks are resisting rising yields
Although the continued rise in risk-free yields increases the cost of refinancing companies and puts pressure on growth, its impact on stock markets has remained relatively limited so far.
MSCI's broadest index of Asia-Pacific shares excluding Japan rose 0.2 percent in early trading, heading for a monthly loss of just over 1 percent.
The Japanese Nikkei index rose 0.9 percent, and is heading to end the month with little change, while the South Korean Kospi index is heading for monthly gains of 1.4 percent.
Nasdaq futures rose 0.13 percent, Standard & Poor's 500 futures rose 0.16 percent, while Euro Stoxx 50 and DAX futures increased 0.5 percent each.
The resilience of stocks is attributed to strong corporate earnings, the cohesion of the global economy, and continued investment momentum around artificial intelligence.
Mohammed Abhay, head of trading strategy for the Asia-Pacific region at Citi, said that the reaction of stock markets to the rise in yields was more subdued than expected, with nominal GDP growth continuing to support earnings expectations.
The dollar benefits from higher yields
In currency markets, the dollar is heading for monthly gains of approximately 2 percent, benefiting from the rise in US bond yields.
The euro traded near its lowest level in 16 months at $1.1336, heading for a monthly loss of 2.4 percent, in light of the repercussions of the global energy shock and the increase in political risks in Europe.
The British pound fell 0.03 percent to $1.3227, also heading for a monthly loss of about 2.4 percent.
The yen settled at 157.03 to the dollar, heading for monthly gains of about 1.7 percent, with investors reluctant to push the currency to weaker levels, amid fears of joint intervention from Tokyo and Washington.
In commodity markets, oil prices rose on Wednesday, and Brent crude rose 0.56 percent to $103.16 a barrel, while US crude rose 0.11 percent to $89.49. The two benchmarks are heading for monthly gains amid fears of continued supply disruptions due to the war in the Middle East.
Spot gold fell 0.2 percent to $4,171.93 an ounce.
Companies in Asia-Pacific are on track to exceed 2021's record-setting share and convertible bond financings, driven by a wave of investments in artificial intelligence, including chips, data centers and power grids.
Data from the London Stock Exchange Group (LSEG) showed that companies in the region have raised $327.1 billion through stock deals since the beginning of the year, an increase of 53 percent over the same period last year, which puts the market close to exceeding the annual record of $557.6 billion recorded in 2021.
James Wang, head of capital markets for stocks in Asia excluding Japan at Goldman Sachs, said that the total issuances by the end of the year may exceed the 2021 record level, in an indication of the size of the fundraising cycle related to artificial intelligence, and he expects the continued impact of this sector on market sizes during the next two years.
The region needs to raise $230.6 billion during the last quarter to exceed the previous record, which in turn will represent a record level for the last quarter, while investment banks expect a continued flow of stock sales deals and convertible bond issues.
A wave of funding for artificial intelligence
The list of anticipated deals includes the Australian artificial intelligence infrastructure company Vermis, the Singaporean data center operator Dai One, and the Chinese memory chip manufacturer Yangtze Memory Technologies, with each expected to raise about $5 billion.
It is also expected that the new listings and initial public offerings in Asia Pacific, which are expected to be priced before the end of the year, will raise about $10.4 billion, including the Philippine “Myint” offering worth $1.3 billion and priority rights for the South Korean “Samsung Biologics” worth $2.2 billion.
Reliance Jio Platforms, the digital arm of Reliance Industries, has received approval to list its shares in Mumbai, in an offering that could raise about $3.8 billion, while Deloitte China expects three or four additional large listings in Hong Kong, with a value of at least HK$10 billion each.
The companies are focusing on raising money to finance chips used in artificial intelligence, data centers and energy infrastructure. The proceeds of advanced technology companies reached $125.8 billion, or about 38 percent of the total financing, and more than three times their level a year ago.
Third quarter deals showed strong investor appetite; South Korean chip company SK Hynix raised $26.5 billion through a stock offering on Nasdaq, while Chinese optical network equipment company Gongji Innolight raised $7.8 billion in Hong Kong.
But the density of issuances has begun to push investors to become more selective.
Kenneth Chow, head of equity capital markets rankings and products in the Asia-Pacific region at Citi, said that some signs of caution are beginning to emerge after the intensity of deals, with the market remaining open to companies that are able to offer more favorable terms to investors, compared to what they were two or three months ago.
Aaron Oh, co-head of Asia-Pacific equity capital markets at UBS, said liquidity is still plentiful, but the market tends to fund companies that can demonstrate real exposure to AI growth and associated profits, not just an investment narrative around AI.
