Association bullish on loan market

PUBLISHED : Friday, 01 February, 2013, 12:00am
UPDATED : Friday, 01 February, 2013, 5:22am

Coming off a gloomy couple of years, the Asia-Pacific Loan Market Association has a positive outlook on the global loan market, because of the impact emerging markets are expected to have on it.

The association hosted a global summit this week to discuss the potential resurgence of the syndicated loan market this year.

In 2011, the European debt default caused a great deal of volatility in financial markets, causing banks to rein in their lending.

Last year, uncertainty over the fiscal cliff and tax rates in the United States kept US$1 trillion in corporate expenditures at bay.

"Asia-Pacific banks and markets are in good shape," said Atul Sodhi, the association's chairman, managing director and head of global loan syndication, Asia-Pacific.

Last year was "a fairly strong year" for Asia-Pacific loan markets, Sodhi said. The region's share of global volumes "has been on the rise, and it was its second-strongest year in the last six years".

The Asia-Pacific managed to secure about 950 loan deals worth US$310 billion last year, less than in 2011, when about 1,100 deals worth about US$340 billion were recorded.

Despite the dip in loan deals, the number of banks active in Asia still remained about the same as in 2011.

Coupled with strong liquidity pools, this was a healthy trend, the association said.

It expects the Asia-Pacific to continue to remain resilient as mergers and acquisitions in the region are also expected to pick up, since Chinese firms are very keen to invest offshore.

Asia-Pacific merger and acquisition loan volumes rebounded well last year, rising to about US$18 billion from about US$17 billion in 2011 and about US$4 billion in 2009.

As expectations for the Asia-Pacific's emergence grow, the US economy is expected to go through a period of healing and stabilisation.

At the meeting, Peter Hall, the global head of investment grade loan syndications at Bank of America Merrill Lynch, highlighted two key themes, the Basel III reforms and further developments in US fiscal policy, that could be potential market catalysts for this year as lenders across the globe continue to repair balance sheets and continue to fortify capital levels.