Breaking down barriers

Asia’s cross-border ABS market is lying comatose and looks unlikely to be awakened this year for longer than a fleeting breath. But the region’s local markets picked up the slack in 2009, and that trend looks likely to continue in 2010. Matthew Thomas reports.

  • 01 Feb 2010
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ross-border securitisation has never been as prominent in Asia as elsewhere, and there has always been a sense that this is a market for the future. But any progress that had been made was quickly reversed in 2009 as investors largely turned their backs on the product, and the outlook for the market remains clouded.

"Investor appetite is improving for conventional ABS deals, but right now there are still not enough investors to do public cross-border deals," says Andy Lai, head of securitisation for Asia Pacific at BNP Paribas in Hong Kong. "That has been the case since the second half of last year. Most deals are private placements or sold straight into conduits."

The most prominent of those private placements was Shinhan Bank’s $400m residential mortgage securitisation, which was bought entirely by the government-owned Hong Kong Mortgage Corp. It was expected to be the first of two RMBS deals sold by Korean banks directly to the HKMC, but an issue from Woori Bank did not materialise and the one-off deal offered little encouragement to others.

"It was a private placement bought by a single investor," says Richard Lamb, the Tokyo-based head of fixed income debt capital markets for North Asia at Royal Bank of Scotland. "That’s very specific and does not mean much for the return of structured finance in Asia."

Korea’s Asiana Airlines was able to find Japanese demand for a ¥4bn ($41m) ticket receivables deal placed by Deutsche Bank in March, but Asian companies that wanted to securitise their assets last year largely had to rely on the domestic markets.

Asia’s domestic ABS markets have shown signs of development, as state mortgage agencies in the Philippines and Indonesia were able to open up their respective RMBS markets in 2009. Standard Chartered placed three deals in the two countries, with a small combined value of $91m.

But the bank has wider ambitions and was marketing an electricity receivables issue for the Power Sector Asset and Liability Management Corp (Psalm) as this article went to press. The issue was originally intended to be Ps40bn ($869m), and while the issuer lowered its ambitions after raising money elsewhere the deal was still expected to set a new high watermark in the nascent Philippines market.

Landmark local deals, however, cannot make up for the lack of activity in the far bigger, more mature markets, and here bankers see little sign of improvement.

The Japanese ABS market suffered a drop in volume of 34.7% — from ¥36bn in 2008 to ¥23.5bn by the middle of December 2009, according to Dealogic — and bankers say the outlook for 2010 looks grim.

"It’s hard to see where volumes are going to come from in Japan," says Lamb.

Going local

ABS issuance in Korea was worth W18.6tr ($16bn) in the first half of last year, compared with W11.2tr in the same period 2008, and W9.1tr in the first-half of 2007.

The rise in domestic volumes owes much to the lack of international alternatives, but bankers hope the heavy domestic issuance could now lead to a spillover in the other direction, leading Korean issuers back to the international market.

"The financial crisis really hasn’t had much of an impact on the Korean securitization market," says Warren Lee, global head of structured financing solutions at Standard Chartered. "It is likely that Korean issuers will look to re-enter the international securitisation market to diversify their funding sources."

Those Korean issuers now have an alternative to mortgage-backed securitisations: they can use the covered bond format established by Kookmin Bank when it sold a $1bn deal in May. But at least one cross-border RMBS issue is expected from Korea this year, alongside an auto loan securitisation, while state-owned Korea Housing Finance Corp is the only issuer committed to issuing a covered bond. But Korean borrowers which do attempt to sell international RMBS deals this year will have their work cut in finding a willing investor base — and the first few deals if the market returns are likely to have to pay high spreads.

"The problem Korean cross-border issuers have is that their previous deals were mainly sold to conduits, so nobody knows who they are and how they’re performing," says Will Ross, head of the financing solutions group at HSBC. "They don’t get the benefit of being a repeat issuer."

Australian investors are regaining their appetite, bolstered by a A$16bn war chest the government has given the Australian Office of Financial Management (AOFM) to invest in the RMBS market. Half of that has already been invested across 20 different new issues.

The AOFM has been positioning itself as a "cornerstone investor" in RMBS deals, taking the lion’s share of an issue and then trying to encourage other investors to join in. It is now looking to take a more back-seat role, in a response to signs that private sector investors are returning. Members Equity raised A$2.28bn from three deals without the AOFM’s backing, and more recently Bendigo and Adelaide raised A$1bn.

The AOFM money has been welcomed by structured finance bankers in the country, and the government appears to be achieving its aim of improving mortgage competition in Australia — even if the debt agency has at times distorted the RMBS market.
  • 01 Feb 2010

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 Citi 38,857.97 184 9.39%
2 HSBC 38,447.58 227 9.29%
3 JPMorgan 34,744.34 142 8.40%
4 Bank of America Merrill Lynch 28,556.15 119 6.90%
5 Deutsche Bank 18,270.77 72 4.42%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 13,268.07 33 6.30%
2 Bank of America Merrill Lynch 11,627.56 29 5.52%
3 Citi 11,610.06 30 5.52%
4 HSBC 10,091.34 29 4.79%
5 Santander 9,533.17 25 4.53%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Citi 13,617.40 57 11.05%
2 JPMorgan 12,607.77 55 10.23%
3 HSBC 9,327.72 50 7.57%
4 Barclays 8,643.78 30 7.02%
5 Bank of America Merrill Lynch 6,561.15 18 5.32%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UniCredit 3,966.12 27 13.01%
2 SG Corporate & Investment Banking 2,805.90 16 9.20%
3 ING 2,549.27 20 8.36%
4 Citi 2,526.98 15 8.29%
5 HSBC 1,663.71 16 5.46%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 19 Oct 2016
1 AXIS Bank 5,944.45 123 18.53%
2 HDFC Bank 3,792.05 100 11.82%
3 Trust Investment Advisors 3,390.86 145 10.57%
4 Standard Chartered Bank 2,299.63 31 7.17%
5 ICICI Bank 1,894.86 51 5.91%