Moody's gives upbeat take on issuance record in '97
Moody's gives upbeat take on issuance record in '97
LONDON (Dow Jones): In a report published yesterday, Moody's Investors Service highlights the resilience and strength of Asian structured finance markets in the face of recent months' market turmoil and a generally cautious approach to the whole idea of securitization.
Not only did 1997 produce record issuance, but as analysts point out, Asian acceptance of securitization as a financing tool is becoming more broad-based, and Asian originators of asset- backed securities and mortgage-backed securities deals have discovered the classic benefits of securitization.
This is not to suggest that everything went smoothly. For example, only half the planned number of issues were launched in 1997 -- 14 in all -- but this was still twice the number of Asian securitization deals rated by Moody's in all previous years put together.
The countries from which they were issued, together with the assets securitized, were Hong Kong (residential mortgages), by far the most developed market; Taiwan (enhanced convertible bonds); Indonesia (motorcycle and light commercial vehicle loans); Thailand (auto leases and loans), plus a securitization of shipping receivables from an offshore entity of a firm in China.
Moody's report includes an analysis of developments and prospects for future development in each of the above countries. Outlook Moody's senior analyst, Ann Rutledge, based in Hong Kong and author of the report, expects 1998 securitization volumes to increase, especially from Asian corporates and from portfolios of distressed bank assets.
'For much of 1998, growth is likely to be moderate, rather than explosive, due to four major factors that still prevent rapid market development,' she said.
The four factors are:
* Legal and regulatory uncertainties and a lack of securitization infrastructure in several countries with weaker jurisprudential traditions and greater scope for administrative discretion in interpreting or modifying procedures and laws.
* Continuing cross border macroeconomic instabilities leading to unfavorable swap market conditions that hinder market development;
* An Asian attitude to investment that has traditionally been more equity and yield-oriented, based on relationships or corporate brand recognition rather than in-depth risk-return analysis;
* Market sentiment among bond investors in the mature market, who may be as overly cautious after the Asian meltdown as they were excessively bullish prior to it.
Moody's believes Hong Kong will be the major engine for market growth in 1998, but other possible centers of activity are Thailand, Korea and China. Indonesia may require a return to stability after financial and political turmoil.