Despite challenges, cross-border issuance likely to revive as market improves in 2010
Moody's Investors Service says in a new report that issuance in the Asian structured finance market will rise moderately in 2010, as investor interest makes a comeback, and the price gap between investors and sponsors narrows.
"The performance outlook for Korean RMBS and auto loan ABS is stable.
Korean residential mortgage loans have a recovery rate of over 99%, while the performance of Korean auto loans has been stable, with no marked deterioration during the credit crisis," says Jerome Cheng, a Moody's Vice President and author of the report.
"The performance outlook for Korean credit card ABS and Singaporean CMBS is negative. The negative outlook on Korean credit card receivables is based on potential deterioration in cardholders' payment ability. Korean household debt is at an all-time high, and a rise in interest rates would
hurt cardholders' ability to pay down unsecured credit card receivables.
For commercial properties in Singapore, the oversupply of office and industrial space and a weak economy are adding pressure to both vacancy and rental rates," says Mr. Cheng.
However, Moody's sees no rating implications on the rated transactions due to asset performance. "Given the level of subordination and the structural mechanisms present, we do not expect any rating actions, even for the two asset classes on which we have a negative outlook," says Mr. Cheng.
In its outlook for activities in 2010, the rating agency says that Korea, the largest securitization market in this region, will issue some cross-border ABS, RMBS, and covered bond transactions. Investor interest is evident, given that Korean receivables did not deteriorate much during the crisis. Rather, they have all improved, as Korea's economy started to improve.
In its review of 2009, Moody's notes that the fallout from the credit crunch significantly impacted the issuance from the Asian structured finance market -- with the exceptions of the domestic markets in Korea and India.
Korea's domestic and cross-border issuance in 2009 was USD33.0 billion, 87.6% of the region's total USD37.7 billion issuance. Korea's domestic market was dominated by project finance securitizations and RMBS, while its cross-border market generated all the foreign currency-denominated issuance in the region, including Asia's first covered bond transaction.
Moody's rating actions in 2009 were mainly downgrades related to changes in counterparty ratings and the change in Korea's local currency bond ceiling. "The downgrades were not driven by pformance deterioration in the underlying receivables. If anything, the performance of these receivables is well within our expectations," explains Mr. Cheng.
Moody's also changed its assumptions for three transactions, as perceived levels of risk increased. Two of them are deferred payment transactions in Singapore where the underlying residential property buyers' default risk had increased and the property values had declined. The third one is a Real Estate Investment Trust (REIT) in Taiwan where the REIT had acquired a new property through increased leverage. The ratings of these three transactions were subsequently downgraded.
The report discusses Moody's expectations for the Asian structured inance market in 2010, examines the outlook for cross-border Korean RMBS and ABS and Singaporean CMBS, summarizes issuance activities in 2009, and discusses collateral performance and the rating downgrades in
2009.
The report, "Asian Structured Finance: 2009 Review and 2010 Outlook" can be accessed at www.moodys.com.
Sunday, February 7, 2010
Momentum likely to fade in second half of 2010, making stock picking increasingly important
Asian markets rallied strongly last year, spurred by government stimulus measures and liquidity-driven buying. While this trend is likely to carry through into the first half of 2010, Aberdeen Asset Management believes that the second half of 2010 will be altogether more challenging.
The key risks are in the timing of governments as they exit unorthodox stimulus strategies and what happens as monetary policy tightens across the region in response to rising inflation, according to Adam McCabe, Senior Portfolio Manager on the fixed income.
He believes that the consequences of any mis-step could be huge and predicts policy-makers would rather wait too long than do the opposite and risk a ‘double-dip’ recession. Easy money is leading to the risk of asset bubbles, for example in various property markets across Asia, and elsewhere across emerging markets as policy makers maintain loose monetary policy.
Although rising interest rates are outwardly negative for bonds, Aberdeen sees selective opportunities because not every development appears priced in.
“We are long Asian currencies generally, with any short term periods of USD strength providing an entry point for our preferred trades in the Korean won, Indonesian rupiah and Indian rupee. We also find relative value in Asian investment grade bonds versus US and European investment grade bonds. And Asian banks in particular look cheap versus European and US banks, leading us to take an overweight position on financials,”
Mr Adam summarised.
His theme of greater discrimination was echoed by Kwok Chern-Yeh, Investment Manager on the Asian equity team, who says stock-picking will gain in importance as buying momentum fades.
“We’re seeing investors start to pay more attention to company fundamentals. It’s really not yet clear how the recent pick-up in earnings may have been flattered by the inventory bounce and cost-cutting. Valuations suggest the markets are due for a pull-back. The trouble is the weight of money coming in, or waiting to do so, remains considerable and may lead to new highs in the near term.”
Mr Kwok Chern-Yeh affirmed Aberdeen style was to focus on defensive, cash rich names with strong franchises. BHP Billiton and Hindustan Lever, for example, were new additions to its model regional portfolio in 2009.
Mr.Chaikaseam Vadhanasiripong , Head of Funds Distribution, Aberdeen Asset Management Company Limited said “Overall Aberdeen anticipates more subdued asset market returns in 2010 versus 2009 because global recovery will be constrained by G3 delevering, ensuring that export levels won’t return to pre-crisis levels for a long time. It foresees growth in emerging market economies leading that of developed economies over the next three to five years, and Asia in turn leading emerging markets
The company aims to offer an outstanding pure asset management business that is well-diversified by territory, channel, and product. Our investment expertise is the management of client portfolios in equities and fix income from a fundamental perspective. This forms the basis of our core investment competence. Our business direction is to build long-term relationships with our clients and partners through strong performance and first-class client service”
For Thailand, Aberdeen will continue to reinforce our position as the leader in equity funds, especially FIF funds, by providing superior products, services, and direct accessibility to our fund managers from around the globe. Also, we've launched several services such as Monthly Investment Plan, Multi-redemption accounts, Internet Online Channel redesign to provide more convenient and to enhance clients' experience.
Mr. Chaikaseam added “For new business opportunities, we intent to develop our investment capability and distribution platforms in order to enter new markets and segments where we may have a competitive and sustainable edge. Last but not least, we will continue to educate investors on fundamental-driven long term investment approach via articles, interviews, mass media, and public seminars.”
About Aberdeen Asset Management Group
Aberdeen Asset Management manages over US$232.2 bn* of third party assets from its offices around the world. At Aberdeen, asset management is our sole business. We operate independently and only manage assets for third parties, allowing us to focus only on their needs, without conflicts of interest. Our clients access our investment expertise across the three asset classes: equities, fixed income and property. We package our skills in the form of segregated and pooled products across borders. We invest worldwide and follow a predominantly long-only approach, based on fundamentally sound investments – we do not chase market fads.
The key risks are in the timing of governments as they exit unorthodox stimulus strategies and what happens as monetary policy tightens across the region in response to rising inflation, according to Adam McCabe, Senior Portfolio Manager on the fixed income.
He believes that the consequences of any mis-step could be huge and predicts policy-makers would rather wait too long than do the opposite and risk a ‘double-dip’ recession. Easy money is leading to the risk of asset bubbles, for example in various property markets across Asia, and elsewhere across emerging markets as policy makers maintain loose monetary policy.
Although rising interest rates are outwardly negative for bonds, Aberdeen sees selective opportunities because not every development appears priced in.
“We are long Asian currencies generally, with any short term periods of USD strength providing an entry point for our preferred trades in the Korean won, Indonesian rupiah and Indian rupee. We also find relative value in Asian investment grade bonds versus US and European investment grade bonds. And Asian banks in particular look cheap versus European and US banks, leading us to take an overweight position on financials,”
Mr Adam summarised.
His theme of greater discrimination was echoed by Kwok Chern-Yeh, Investment Manager on the Asian equity team, who says stock-picking will gain in importance as buying momentum fades.
“We’re seeing investors start to pay more attention to company fundamentals. It’s really not yet clear how the recent pick-up in earnings may have been flattered by the inventory bounce and cost-cutting. Valuations suggest the markets are due for a pull-back. The trouble is the weight of money coming in, or waiting to do so, remains considerable and may lead to new highs in the near term.”
Mr Kwok Chern-Yeh affirmed Aberdeen style was to focus on defensive, cash rich names with strong franchises. BHP Billiton and Hindustan Lever, for example, were new additions to its model regional portfolio in 2009.
Mr.Chaikaseam Vadhanasiripong , Head of Funds Distribution, Aberdeen Asset Management Company Limited said “Overall Aberdeen anticipates more subdued asset market returns in 2010 versus 2009 because global recovery will be constrained by G3 delevering, ensuring that export levels won’t return to pre-crisis levels for a long time. It foresees growth in emerging market economies leading that of developed economies over the next three to five years, and Asia in turn leading emerging markets
The company aims to offer an outstanding pure asset management business that is well-diversified by territory, channel, and product. Our investment expertise is the management of client portfolios in equities and fix income from a fundamental perspective. This forms the basis of our core investment competence. Our business direction is to build long-term relationships with our clients and partners through strong performance and first-class client service”
For Thailand, Aberdeen will continue to reinforce our position as the leader in equity funds, especially FIF funds, by providing superior products, services, and direct accessibility to our fund managers from around the globe. Also, we've launched several services such as Monthly Investment Plan, Multi-redemption accounts, Internet Online Channel redesign to provide more convenient and to enhance clients' experience.
Mr. Chaikaseam added “For new business opportunities, we intent to develop our investment capability and distribution platforms in order to enter new markets and segments where we may have a competitive and sustainable edge. Last but not least, we will continue to educate investors on fundamental-driven long term investment approach via articles, interviews, mass media, and public seminars.”
About Aberdeen Asset Management Group
Aberdeen Asset Management manages over US$232.2 bn* of third party assets from its offices around the world. At Aberdeen, asset management is our sole business. We operate independently and only manage assets for third parties, allowing us to focus only on their needs, without conflicts of interest. Our clients access our investment expertise across the three asset classes: equities, fixed income and property. We package our skills in the form of segregated and pooled products across borders. We invest worldwide and follow a predominantly long-only approach, based on fundamentally sound investments – we do not chase market fads.
Friday, February 5, 2010
Global Corporate And Sovereign Rating Actions Hit 23-Year High Of 1,560 In 2009, Article Says
Standard & Poor's Ratings Services downgraded 1,298 global issuers and upgraded 262. The 1,560 total rating actions is the most taken in a single year since our series began in 1987, including the previous record high of 1,207 downgrades and 222 upgrades in 2001, said an article published today by Standard & Poor's Global Fixed Income Research, titled "Global Corporate And Sovereign Rating Actions: Fourth-Quarter 2009 (Premium)."
Of the rating actions in 2009, 62% were based in the U.S., 16% were based in Europe, 15% were based in the emerging markets, and 8% were based in the other developed region (Australia, Canada, Japan, and New Zealand).
"With the exception of the emerging markets, each region saw their downgrade ratios peak in the first quarter and then taper off before hitting lows for the year in the fourth quarter," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The emerging markets' downgrade ratio peaked in the second quarter at 97%."
Of the industries that had more than five rating actions globally in 2009, finance companies, automotive, banks, sovereigns, forest products and building materials, capital goods, and media and entertainment all had downgrade ratios of 90% or higher for the year. Health care performed the best in 2009, with a downgrade ratio of only 33%--less than half the average across all sectors.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect on the Global Credit Portal at www.globalcreditportal.com and to RatingsDirect at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Of the rating actions in 2009, 62% were based in the U.S., 16% were based in Europe, 15% were based in the emerging markets, and 8% were based in the other developed region (Australia, Canada, Japan, and New Zealand).
"With the exception of the emerging markets, each region saw their downgrade ratios peak in the first quarter and then taper off before hitting lows for the year in the fourth quarter," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The emerging markets' downgrade ratio peaked in the second quarter at 97%."
Of the industries that had more than five rating actions globally in 2009, finance companies, automotive, banks, sovereigns, forest products and building materials, capital goods, and media and entertainment all had downgrade ratios of 90% or higher for the year. Health care performed the best in 2009, with a downgrade ratio of only 33%--less than half the average across all sectors.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect on the Global Credit Portal at www.globalcreditportal.com and to RatingsDirect at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Fitch Affirms Holcim Capital (Thailand)’s Bonds; Revises Outlook to Stable
Fitch Ratings (Thailand) Limited has today affirmed the National Long-term ‘AA-(tha)’ ratings on two series of guaranteed debentures issued by Holcim Capital (Thailand) Limited (HCT) – Series II (due 2010) and Series III (due 2012), amounting to THB4.6bn. The Outlook on the ratings has been revised to Stable from Negative, due to a similar Outlook revision of its guarantor, Holcim Ltd. (Holcim) (For more information, please refer to the rating action commentary entitled “Fitch Revises Holcim’s Outlook to Stable; Affirms IDR at ‘BBB’”, dated 29 January 2010). The ratings of HCT’s debentures are based entirely on the irrevocable and unconditional guarantee provided by Holcim (‘BBB’/Stable).
Holcim’s Outlook revision reflects Fitch’s view that its credit metrics will improve gradually in the coming 24 months, which will place them more comfortably within the range of a ‘BBB’ rating. Trading conditions for the industry in mature markets will likely to remain challenged, especially in Western Europe, while growth is expected to persist in major emerging countries. Furthermore, Fitch expects positive impact on free cash flow generation from cost reduction measures, lowered capex due to the phasing out of major investment projects, and a conservative dividend policy. This will enable Holcim to progressively improve its financial metrics at a pace faster than previously anticipated by the agency.
Fitch notes that any changes in the International rating differential between Holcim and Thailand’s Sovereign rating may affect the debentures’ National ratings. In addition, a one notch change in the International rating could result in a change of more than one notch in a National Rating.
Applicable Criteria available on Fitch’s website at www.fitchratings.com: “Corporate Rating Methodology”, dated 24 November 2009.
Contacts: Obboon Thirachit, Pimrumpai Panyarachun, Vincent Milton, Bangkok, +662 655 4755; Elisabetta Zorzi, Milan, +39 02 8790 87213.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Holcim’s Outlook revision reflects Fitch’s view that its credit metrics will improve gradually in the coming 24 months, which will place them more comfortably within the range of a ‘BBB’ rating. Trading conditions for the industry in mature markets will likely to remain challenged, especially in Western Europe, while growth is expected to persist in major emerging countries. Furthermore, Fitch expects positive impact on free cash flow generation from cost reduction measures, lowered capex due to the phasing out of major investment projects, and a conservative dividend policy. This will enable Holcim to progressively improve its financial metrics at a pace faster than previously anticipated by the agency.
Fitch notes that any changes in the International rating differential between Holcim and Thailand’s Sovereign rating may affect the debentures’ National ratings. In addition, a one notch change in the International rating could result in a change of more than one notch in a National Rating.
Applicable Criteria available on Fitch’s website at www.fitchratings.com: “Corporate Rating Methodology”, dated 24 November 2009.
Contacts: Obboon Thirachit, Pimrumpai Panyarachun, Vincent Milton, Bangkok, +662 655 4755; Elisabetta Zorzi, Milan, +39 02 8790 87213.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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