Bangkok--27 Mar--Fitch Ratings
Fitch Ratings today said cross-border issuance volumes for securitisation in Asia (ex-Japan) for 2007 would remain similar to that of 2006. In its just-published regional securitisation report titled "Asian (ex-Japan) 2006 Review and 2007 Outlook", the agency added that it expects more commercial banks will make use of securitisation this year in order to better manage their existing loan portfolios. The success of the recent trade finance loan securitisation by Citigroup would also provide a template for multi-jurisdiction securitisations which are not common in Asia (ex-Japan).
Singapore and Korea will remain the two most active markets for cross-border securitisation issuance, without any major changes in asset types. Fitch also expected the issuance volumes to increase in other markets such as China, Taiwan and Thailand, with the first offshore securitisation likely to emerge from Thailand in 2007.
In South Korea, Fitch expects the cross-border securitisation volume to stay flat, with ABS issuance volumes declining from last year due to the availability of alternative funding sources (like internal funding or the corporate bond market) to the major ABS issuers including LG Card, Hyundai Capital etc. RMBS issuance volume, on the other hand, is seen increasing due to the continuing issuance by Standard Chartered First Bank as well as the first-time issuance by other Korean banks for funding and risk management purposes. The ample liquidity and increased investor familiarity with Korean assets is also likely to lead to more unwrapped securitisations with similar tight pricing as that achieved in 2006.
Fitch says the CMBS issuance volume in Singapore will regain its momentum in 2007. With REITs in the region now numbering 14, Fitch predicts more of these trusts will pursue property acquisitions in Asia (ex-Japan) and finance such acquisitions through CMBS issuance. Besides the most common asset types such as offices, shopping malls and industrial properties, Singapore may see hotels or service apartments acting as collateral in future CMBS transactions, given the well-received CMBS originated by RCS Trust in 2006.
Meanwhile, the ample liquidity in Hong Kong's banking market will continue to dampen the interest in securitisation. The market will remain quiet in 2007, while potential issuance of CMBS backed by Hong Kong properties more likely come from Singapore-listed REITs.
Mortgage-backed securities ("MBS") will become one of the hot topics in Taiwan in 2007. Following the recovery of the Taiwanese residential property market and the shift in business focus after the credit card crisis, Taiwanese banks are increasingly considering RMBS issuance to manage the credit exposures on their significantly larger residential mortgage portfolios. In addition, more property companies will consider REITs and Real Estate Asset Trusts ("REATs") for financing their development projects and for portfolio management.
Finally in China, Fitch believes the securitisation volume to grow considerably in 2007. The State Council has given in-principle approvals to allow a second batch of banks to carry out a trial operation of credit asset securitisation. The Specific Asset Management Plan ("SAMP") issuance was suspended in September 2006 as SAMP is in an internal process of re-evaluation. Demand for credit securitisation products should strengthen with Chinese authority's plan to relax the investment rules, making insurance and securities companies eligible to invest in this sector. The active acquisition of commercial properties by foreign real estate funds in China could also lead to increased CMBS issuance from China.
For other markets such as Thailand and India, the majority of the securitisation deals will continue to be done domestically.
Contacts: Stan Ho Ho Ming, Hong Kong, Tel: +852 2263 9668/ [email protected] ; Alex Choi, +852 2263 9936/ [email protected]
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301.