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stable outlook for the Asian structured finance sector

Hong Kong, January 05, 2012 — Moody’s Investors Service says the outlook for the Asian structured finance sector is stable, amidst global economic uncertainty.


“The Asian economy has shown moderate growth despite the global financial crisis. However, this growth will slow because of the uncertainty surrounding the global economy,” says Jerome Cheng, a Moody’s Vice President and Senior Credit Officer.


Cheng was speaking on the release of the Asian Structured Finance 2012 Outlook, which he co-authored.


The report looks at Korean securitizations, Singapore CMBS, and Asian

(ex-Japan) collateralized loan obligations (CLOs).


New Korean RMBS’ stable performance is supported by mortgage loans with low loan-to-value ratios (LTVs) and the regulator’s guideline to offer more long-term, fixed-rate amortizing notes. Delinquencies and defaults of loans with low LTVs have traditionally been low.


“Existing Korean mortgage loan transactions, as well as new and existing Korean auto loans, will demonstrate stable performance, with low delinquencies and defaults,” says the co-author, Marie Lam, a Moody’s Vice President and Senior Credit Officer.


While high levels of household debt are credit negative, moderate GDP growth, a stable employment market, stable mortgage loan performance, regulatory guidelines to control the growth of household debt, tightened underwriting properties, and transaction eligibility criteria will help moderate performance deterioration in Korean credit card receivables.


New Singaporean CMBS transactions will feature high quality properties, low LTVs, and strong debt service coverage ratios.


“Although new and existing CMBS transactions share many traits, new transactions will have enhanced features, including a minimum of six months of liquidity protection and two-year tail periods,” says Cheng.


Transactions with strong S-REIT sponsorships will enjoy an additional layer of protection, in the form of sound financial management, asset enhancement initiatives, and expert leasing management.


“Many S-REITs have strong domestic support and are ultimately linked to the Singapore government or related entities. This support helps CMBS sponsors raise equity and debt capital, even under adverse market conditions, such as the global financial crisis,” says Cheng.


Finally, the report provides a stable outlook for Asian (ex-Japan) CLOs because of strong replenishment conditions, a strong alignment of interest with investors, moderate economic growth in Asia, manageable refinancing risk, portfolio diversity, and the stable corporate outlook for key industry sectors.


The report is titled Asian Structured Finance 2012 Outlook can be accessed on www.moodys.com

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