In the junk bond market, Asian companies are rushing in where the region’s investors fear to tread.

More than two dozen Asian companies have turned to America and Europe to raise a record $9.5 billion of high-risk, high-yield securities they were unable to sell at home. Fortescue Metals Group Ltd. sold $2.1 billion of notes to build an iron mine in the biggest sale by an Asian company with ratings below Baa3 at Moody’s Investors Service and BBB- at Standard & Poor’s.

“There isn’t a pool of capital in Australia to fund a project of this size,” the chief financial officer of Perth, Australia-based Fortescue, Chris Catlow, said. The company will become the nation’s third-largest producer once the mine is completed. “We needed the money as soon as possible to keep the project on track to meet the huge demand for iron ore coming out of China.”

Funds are too scarce to meet the needs of non-investment-grade companies in a region that is growing 7.9% a year, according to International Monetary Fund estimates. Investors are attracted to the corporate debt because of yields 50 basis points to 200 basis points higher than American company debt with similar ratings, according to HSBC Holdings Plc data.

Asian corporate bonds have returned 2.6% since the end of June, beating the 2% gain on corporate debt worldwide, according to indexes compiled by Merrill Lynch & Co. The surge erased declines suffered in April and May during a rout in emerging market assets.

Shanghai Real Estate Ltd., a Chinese developer, PT Lippo Karawaci, Indonesia’s biggest publicly traded property group, and PT Excelcomindo Pratama, Indonesia’s third-largest cellular-phone operator are among Asian companies selling junk bonds this year.

“We resumed buying Asian bonds because we believe there’s scope for better returns on the back of the region’s economic fundamentals,” said Roel Jansen, who helps manage $1.5 billion of debt at ING Investment Management in Hong Kong.

Buyers of Fortescue’s notes, rated BB- at S&P and Ba3 by Moody’s, are getting 286 basis points more in yield than they would from bonds with similar ratings sold by American companies.

The largest portion of Fortescue’s sale is $1.08 billion in 10.625% notes maturing in 2016 that yield 580 basis points more than similar maturity U.S. Treasuries, Bloomberg data show. That compares with an average yield premium of 294 basis points, or 2.94 percentage points, for the average American security with ratings ranging between BB and B, according to Merrill.

“It’s a new project and there is construction risk,” said Oon Jin Chng, a credit strategist at HSBC in Hong Kong. “Investors are demanding a higher yield to take on that risk.”

American investors bought 65% of Fortescue’s bonds, with 20% being sold in Europe, Catlow said. The notes were denominated in dollars and euros. The sale was the first debt offering by the company.

Megaworld Corp., the Philippines’ third-largest builder, had to turn to foreign investors because the local debt market wasn’t big enough to meet its needs, said Kingson Sian, an executive director at the company in Manila.

The construction company last month raised $100 million by selling 7.75% securities maturing in 2011 to fund a hotel, retail and office complex near Manila’s airport. Overseas investors bought 50% of the notes.

“If we raised the money locally, we could only get 50% of the issue, Sian said in an interview. “We also want to make ourselves known to the international investors.”

Almost half of the money raised this year, or $4 billion, was from companies that had never sold debt to international investors. A total of 28 companies sold securities in 2006. So far this year, more junk-rated Asian corporate debt has been sold than during a comparable period since Bloomberg began keeping records in 1999. Prior to that year, there were few such sales.

“Asian issuers tap the overseas bond markets to raise their profile and to expand their investor base,” said Aamir Rahim, managing director and head of Asia Pacific capital markets at Citigroup Inc. in Hong Kong. “While local markets in Asia have developed significantly, the international markets remain the most effective.”

Investor demand is so strong that UTI Bank Ltd. in Mumbai received almost $1 billion of orders this month, with 46% from the American and European investors, for a $150 million sale of 7.25% bonds maturing in 2021, said Himatri Chatterjee, a vice president in the bank’s treasury department.

UTI Bank, part-owned by India’s largest insurer, the Life Insurance Corp. of India, sold notes to fund its expansion overseas, including paying for new offices in Shanghai and Hong Kong, Chatterjee said.

UTI is rated BB+ by S&P, one level below investment grade, and Ba2 by Moody’s. The yield gap over comparable maturity Treasuries on the company’s dollar bonds narrowed by 15 basis points to 225 basis points since the debt started trading.

Investors in Europe and America demand higher premiums to buy notes sold by companies in developing countries because they run the risk both that the company will stumble and that there will be currency devaluation. There is also a concern that many of the companies are first-time sellers of debt and lack a track record.

Ocean Grand Holdings Ltd., a Hong Kong-listed maker of aluminum products, last month defaulted on $125 million of debt, less than one year after selling the securities in its first overseas sale. The dollar-denominated bonds were rated BB- by Standard & Poor’s.

A devaluation in Brazil led Globo Comunicacoes e Participacoes SA, Brazil’s largest media company, to default on more than $1 billion of debt in 2002. SBS-AGRO Bank, once Russia’s biggest private bank by assets, collapsed after the ruble devaluation in 1998 drove up the cost of servicing hundreds of millions of dollars of foreign currency debt.

By year-end, the region’s economy is likely to outpace a growth rate of 4.9% for the rest of the world, according to estimates by the International Monetary Fund.

“The amount of cash dedicated to Asia has increased, and portfolio managers like what they see,” said Citigroup’s Rahim.