31.08.2016, 19:18
Moody's Publishes August Edition of Structured Thinking: Asia Pacific
OREANDA-NEWS. The August 2016 edition of the Structured Thinking: Asia Pacific newsletter by Moody's Investors Service covers key developments in structured finance markets in China, India, Japan, South Asia and the ASEAN region.
In South Asia and the ASEAN region, Moody's newsletter reports that covered bonds could provide a viable option for financial institutions to diversify their funding sources, even in the absence of specific legal and regulatory frameworks for covered bonds.
Loan growth in many parts of South Asia and the ASEAN region has outpaced deposit inflows over the past five years, with many leading financial institutions using most of their stock of deposits for the purpose of funding loans. Diversification of funding sources and maturity profiles will therefore rise in importance for these institutions.
With the exception of Singapore, countries in South Asia and the ASEAN region do not currently have specific covered bond regulatory frameworks. However, Moody's newsletter notes that the lack of a specific covered bond regulatory framework is not an impediment to the issuance of covered bonds, as long as a country's existing legal framework can support the key credit protections of covered bonds.
In China, Moody's newsletter reports that residential mortgage-backed securities (RMBS) are exposed to the possibility that mortgages backing securitized loans will be cancelled, because mortgage transfers are usually not registered at closing. Moody's is of the view that the risk of mortgage cancellation is low, but reflects this risk in its loss assumptions for severe stress scenarios.
Moody's newsletter also covers the Indian auto loan asset-backed securities (ABS) market, noting that the issuance of deals backed by commercial vehicles and equipment will continue to grow in the fiscal year ending 31 March 2017. Higher commercial vehicle and equipment sales and loans to finance those sales will drive auto ABS issuance by loan originators at a time when financing conditions for borrowers are becoming more favorable.
In Japan, Moody's newsletter reports that the government's Yen28 trillion economic stimulus package, which includes measures to assist the financing of small and medium-sized enterprises (SMEs), is credit positive for structured finance deals backed by SME assets such as loan and equipment leasing receivables in collateralized loan obligations (CLOs) and ABS. The stimulus package will ease SME refinancing and provide SMEs with greater flexibility to borrow further.
The August edition of the Structured Thinking: Asia Pacific newsletter contains the following articles:
• Covered Bonds Offer Viable Funding Option in South Asia and ASEAN, Even in the Absence of Legal Frameworks
• Chinese RMBS Exposed to Cancellation of Mortgages but Risk Is Low
• Answers to Frequently Asked Questions About Chinese Housing Provident Fund RMBS
• Greater Indian Commercial Vehicle Sales and ABS Issuance in FY2017 Reflect Positive Credit Conditions
• Japan's Yen28 Trillion Stimulus Package Is Credit Positive for SMEs' Structured Finance Deals
• Mortgages Backing Japanese RMBS Issued Under Revived JHF-Guaranteed Program Will Perform Well
• Rising Real Estate Prices Positive for Japanese RMBS Backed by Condominium Loans
• Longer Japanese Auto Loan Repayment Terms Increase Risk of Default
• Stable Risk Premiums Are Credit Positive for Japanese CMBS; Interest Rate Risk Remains
In South Asia and the ASEAN region, Moody's newsletter reports that covered bonds could provide a viable option for financial institutions to diversify their funding sources, even in the absence of specific legal and regulatory frameworks for covered bonds.
Loan growth in many parts of South Asia and the ASEAN region has outpaced deposit inflows over the past five years, with many leading financial institutions using most of their stock of deposits for the purpose of funding loans. Diversification of funding sources and maturity profiles will therefore rise in importance for these institutions.
With the exception of Singapore, countries in South Asia and the ASEAN region do not currently have specific covered bond regulatory frameworks. However, Moody's newsletter notes that the lack of a specific covered bond regulatory framework is not an impediment to the issuance of covered bonds, as long as a country's existing legal framework can support the key credit protections of covered bonds.
In China, Moody's newsletter reports that residential mortgage-backed securities (RMBS) are exposed to the possibility that mortgages backing securitized loans will be cancelled, because mortgage transfers are usually not registered at closing. Moody's is of the view that the risk of mortgage cancellation is low, but reflects this risk in its loss assumptions for severe stress scenarios.
Moody's newsletter also covers the Indian auto loan asset-backed securities (ABS) market, noting that the issuance of deals backed by commercial vehicles and equipment will continue to grow in the fiscal year ending 31 March 2017. Higher commercial vehicle and equipment sales and loans to finance those sales will drive auto ABS issuance by loan originators at a time when financing conditions for borrowers are becoming more favorable.
In Japan, Moody's newsletter reports that the government's Yen28 trillion economic stimulus package, which includes measures to assist the financing of small and medium-sized enterprises (SMEs), is credit positive for structured finance deals backed by SME assets such as loan and equipment leasing receivables in collateralized loan obligations (CLOs) and ABS. The stimulus package will ease SME refinancing and provide SMEs with greater flexibility to borrow further.
The August edition of the Structured Thinking: Asia Pacific newsletter contains the following articles:
• Covered Bonds Offer Viable Funding Option in South Asia and ASEAN, Even in the Absence of Legal Frameworks
• Chinese RMBS Exposed to Cancellation of Mortgages but Risk Is Low
• Answers to Frequently Asked Questions About Chinese Housing Provident Fund RMBS
• Greater Indian Commercial Vehicle Sales and ABS Issuance in FY2017 Reflect Positive Credit Conditions
• Japan's Yen28 Trillion Stimulus Package Is Credit Positive for SMEs' Structured Finance Deals
• Mortgages Backing Japanese RMBS Issued Under Revived JHF-Guaranteed Program Will Perform Well
• Rising Real Estate Prices Positive for Japanese RMBS Backed by Condominium Loans
• Longer Japanese Auto Loan Repayment Terms Increase Risk of Default
• Stable Risk Premiums Are Credit Positive for Japanese CMBS; Interest Rate Risk Remains
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