Securitisation in Asia has gone from strength to strength. While the troubles in the US sub-prime market have cast a pall over Asian issuance, the long-term prospects look good.
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The availability of cheap loans has prevented acquisition-related securitisation becoming a flow business in Asia, but it still offers an attractive option for lower-rated corporates and there be more deals as interest rates rise.
Unlike their US and European counterparts, Asian banks have been reluctant users of securitisation for balance sheet management. But with the first deadlines for Basle 2 coming into effect, the asset class may gain new relevance.
Securitisation players in China are in celebration mode after the first deal off the long-awaited second batch of securitisation pilot projects came to a completion on September 14. The Rmb4.38bn CLO, originated by Shanghai Pudong Development Bank was the first such deal from a medium-sized domestic commercial bank and reopened the domestic ABS market, which has not seen a successful deal since December 2006.
Despite a sluggish straight bond market this year, the domestic securitization market has put up a great performance. Issuance has already topped NT$89bn and is quite likely to reach the NT$100bn mark that some optimistic bankers have predicted.
The promised rush of offshore RMBS issuance from domestic South Korean banks that was expected to uplift the otherwise supply-starved G3 ABS market may seem impossible given the US sub-prime turmoil, but eternally optimistic Asian ABS pros are not losing hope.
The Australian securitisation market is set to spring back to life buoyed by the Reserve Bank of Australia’s recent announcement that it will, from October 8, include RMBS in the list of eligible securities it will accept under repo agreements.
Standard Chartered Bank has managed its Asian exposure through its START collateralised loan obligation scheme over the past two years. IFR Asia discusses the benefits of the programme with the bank’s group head of portfolio management, Matthew Geason.
ICICI Bank is a prolific user of the securitisation product and has this year set new benchmarks that have injected spirit into an otherwise moribund domestic Indian securitisation market. It established several landmarks and pushed the limits in such a way that it has shown the path for other originators looking to get capital relief and generate liquidity through securitisation.