Taipei-based Bank SinoPac is planning to purchase credit derivatives next year for its USD4.5 billion loan portfolio, a move that will make it among the first domestic banks to use the products in Taiwan, according to Henry Chang, head of fixed-income and derivatives. "Credit derivatives could act as a vehicle for hedging our loan exposure," said Chang.
Chang said SinoPac is waiting until there is more liquidity in the underlying bonds before it pulls the trigger on credit-default swaps, because default swaps are priced from bonds and more liquidity should lead to more accurate pricing. "There needs to be a better reference for pricing--we need more issuance," he added. He believes that more bond issues in Taiwan will come to market in the coming months.
However, Chang said he is speaking with a number of banks that have been marketing credit products to him, including Credit Suisse First Boston, Deutsche Bank, JPMorgan and UBS Warburg. Josephine Lee, spokeswoman at CSFB, Anasthasia Chye, spokeswoman at Deutsche Bank, Toni Phillips, spokeswoman at JPMorgan and Aubrey Ho, spokeswoman at UBS, did not return calls.
