Moody's Investors Service says in a new report that it expects Korea and Singapore to generate most of the activity in Asia's structured finance market (ex-Japan) in 2007, while the development of China's market will continue with the emergence of more transactions and greater diversity in asset types.
The new Moody's report reviews trends and developments in Asia's securitization market for 2006 and details its outlook for 2007. Its two authors include Marie Lam and Li Ma, both Vice President and Senior Analyst located in Moody's Hong Kong office.
"Moody's anticipates Korea to originate more cross-border RMBS transactions and from more than one originator, while ABS issuance will fall as the number of potential originators in this area continues to shrink," says Marie Lam. In 2006, Korea was the largest market in Asia (ex-Japan) and generated US$3.51 billion in securitized debt. During 2007, the Singapore market will continue as before with most activity coming from the real estate sector. "It has been a stable market, allowing such transactions to flourish. In 2006, US$1.16 billion was issued through CMBS and the securitization of progressive/deferred payments from yet-to-be completed residential projects," says Li Ma.
With regard to China, Ma sees more developments, saying, "The Mainland will see a more active securitization market as the second round of pilot deals is now open for applications."
"In 2006, the second CLO issued by the China Development Bank was completed and seven selective asset management plans won approval. We also expect to see cross-border transactions from China, as in 2006, when the first cross-border CMBS was completed," Ma says.
For Taiwan, Jerome Cheng, a Vice President and Senior Credit Officer, sees more commercial real estate activity through REITs and REATs, while banks may use securitization as a tool to manage risk exposure in their residential mortgage portfolios.
"In 2006, the card crisis in Taiwan dampened interest in unsecured credits and blunted ABS activity. Accordingly, investor confidence may not have fully recovered and consumer receivables-backed securitizations are unlikely in 2007," explains Cheng.
Meanwhile, liquidity in the Hong Kong capital market continued to limit the growth of the securitization market in 2006 and only one transaction emerged. Moody's expects the Hong Kong market to maintain a low profile as private-sector interest remains lacking.
A copy of the Moody's report, entitled "2006 Review and 2007 Outlook, Asian Structured Finance: Expects Similar Activities and China Offering More Opportunities" is now available on the Moody's website: http://www.moodys.com.