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Derivatives

Taiwan CDO Market To Take Flight

Collateralized debt obligation houses including Deutsche Bank and BNP Paribas expect demand for synthetic CDOs in Taiwan to take off in the coming months. "I expect to see a broad acceptance for CDOs by the first quarter of next year," said C.G. Lai, head of fixed income at BNP in Taipei, noting that CDOs have yet to receive widespread recognition domestically. "There is growing interest for dollar-denominated offshore CDO issuance," concurred an official at Deutsche Bank. "We've seen sporadic interest but there is now a general awakening and I believe that it will develop into a real trend next year," added Lai, noting the role of increasing investor education as clients seek higher-yielding alternatives over traditional fixed income products. BNP is working on closing its first transaction by year-end, said Lai, declining to further elaborate.

CDO investments kick-started earlier this year in Taiwan with the launch of a USD10 million single-tranche mezzanine deal structured by Citigroup and purchased by Fubon Securities (DW, 5/4).

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