Across The BorderConsumer-related issuers set to lead asset-backed securities growth
Market rockets to 1.6tr yuan as firms are thirsty for finance while government is keen to cut debt levels
China’s asset-backed securities (ABS) market has rocketed to 1.6 trillion yuan (HK$1.79 trillion) from 60.2 billion yuan in 2013 after the government gave a go-ahead to the structured finance tool in 2012, thanks to corporates’ demand for financing and government efforts to cut debt.
Analysts expect the growth to continue, led by the increase of consumer-related ABS amid China’s economic transition.
“As long as there is not a big surge of interest rates [in China], ABS market will continue to grow,” Industrial Bank in Shanghai chief economist Lu Zhengwei said, adding that the explosive growth of ABS echoes China’s effort to reduce leverage in the real economy.
An ABS is a bond-like product comprising assets such as corporate loans, income receivables, leases or infrastructure charges. Credit rating focuses more on the assets rather than the issuers. High interest rates push up the cost of issuing an ABS.
By December 19 there were 784 ABS products already issued in the mainland market, according to data from Wind Information. Accumulative issuance reached 1.6 trillion yuan from 920.3 billion yuan at the end of last year and 375.3 billion yuan by the end of 2014.