After returning to pre-Asian crisis volumes last year, the Asian syndicated loan market is poised for further growth this year as economies in the region continue to expand, according to projections by the Asia Pacific Loan Market Association. 'Asian economies are showing signs of improvement which means companies are boosting capital spending for expansions and that leads to an increase in the syndicated loan market,' chairman Philip Cracknell said on the eve of the association's annual conference in Hong Kong. Based on this year's activity syndicated loans should exceed last year's US$198.6 billion and 1,130 transactions, he said: 'I suspect it will be closer to US$250 billion.' Volumes fell to US$84 billion in 1998 as banks stopped most lending and dumped existing loans in the secondary market in case they turned into distressed debt. The first quarter is generally quiet in the loan market, but by the end of last month volumes were already US$70 billion with significant increases in Taiwan, India and Japan - which accounts for about 60 per cent of the market. 'The first quarter volume in Taiwan was huge and suggests a doubling or possibly trebling of volumes this year, and in India first quarter volumes are already higher than the total in 2003,' Mr Cracknell said. Hong Kong has seen declining transaction volumes over the past few years as blue-chip companies cut back on borrowing through syndicated loans, favouring instead five- to seven-year revolving credit facilities that can be used as stand-by financing. Lending to mid-sized companies has 'boomed' as they lined up to borrow for new projects and expansion, and that is expected to continue, said Mr Cracknell, who also noted that the level of sophistication of these borrowers was increasing with more of the lending tied to leveraged buyouts. However, as the size of loans to mid-sized companies are generally much smaller than to blue-chips - typically only US$100 million to $250 million - the lending value should not increase that much, he said. For this year, he expects up to $20 billion worth of syndicated lending to Hong Kong companies, up from about $16 billion last year and $5 billion in the year to date.
