Asia Pacific (exJapan) syndicated loan volume reached a new record of $342bn via 1,082 deals in 2011, a 27 percent increase from 2010′s $268.5bn via 943 deals, according to Thomson Reuters LPC. The previous record high, in 2007, was $288.4bn via 894 deals. When Australasia and Japan are excluded, Asia volume jumped 31 percent to $171bn from 2010′s $130.7bn.
Australia, the largest Asia Pacific market (excluding Japan), saw its secondhighest volume in history with $108.6bn of loans for 2011, soaring 70 percent from 2010′s $64bn.
Down Under recorded its highest volume in 2007 with $110.5bn of loans.
Meanwhile, two major Asian markets Hong Kong and Singapore enjoyed record volumes in 2011.
Hong Kong saw $46.4bn of loans in 2011 compared to its previous record of $40.3bn in 2010.
Singapore set a new record in 2011 with $40.8bn of loans, compared to its previous record of $33bn in 2008.
The Lion City’s loan volume was at $22.7bn in 2010. Despite the devastating quake, Japan also saw record high volume. Its $310bn of loans was a 25 percent jump from 2010′s $247.3bn.
The previous record, in 2008, was $273.5bn.
Promising emerging markets China and India may not have exponential growth in volumes, but bankers see these two having the most potential for 2012, according to a poll conducted in October at a roundtable event hosted by the Asia Pacific Loan Market Association.
China loan volume reached $27.8bn, slightly higher than 2010′s $24bn.
Another major market, Taiwan, saw its volume plunge to $41.2bn from the previous year’s $55.3bn.
This was due to the absence of anything quite as big as 2010′s NT$382bn (US$12bn) jumbo financing for Taiwan High Speed Rail.
India offshore loan volume was $24.1bn, a little over 2010′s $22bn. Meanwhile, India’s rupee loan volume dropped to $55.7bn from 2010′s $66.3bn.
HIGH FUNDING COSTS LOOM
Asia Pacific (exJapan) kicked off 2011 with record volumes in the first half and major markets witnessed historichigh volumes.
However, from the first quarter, rising funding costs and tight US dollar liquidity were already biting into some banks’ books.
There were major players, including some Chinese and Hong Kong banks, slowly withdrawing from the lending scene in 1Q11, and by the end of 2Q11 many were sitting on the sidelines.
When the catastrophic earthquake hit Japan in March, there was concern that Japanese banks would retreat as well. But fortunately they had strong reserves and were committed to their lending businesses in Asia.
By the end of the year, they were expanding their books.
In 2H11, the market was hit by yet more disturbing news from Europe, triggering a scare that Europeans would exit Asia.
Meanwhile, Taiwanese banks gaining popularity as the region’s most active lenders were experiencing a hike in funding costs, causing loan pricing to rise.
But some of the region’s borrowers were slow to pick up on the pricing trend, and some lenders had committed to deals priced before the market changed.
As a result, mature markets such as Hong Kong saw price flexes, while sophisticated borrowers were reducing the size of their loans and restructuring terms to adapt to the market volatility.
Consequently, Asia Pacific volume fell significantly in 4Q11 a 22 percent plunge to $74bn from 3Q11′s $95bn.
And when several banks announced cuts in headcount by the end of the year, Asia lost some loans bankers.
Though all may seem grey for Asia in 2012, the optimists believe that regional banks will step up and deals will still get done.
As ANZ’s global head of loan syndications, John Corrin, said in a November interview, “Even if major market players were to slowly retreat, there are others who could step up and easily take on the additional lending.
“When the market conditions get tough, the strongest banks will continue underwriting. Deals will get done.”
REFI WAVE TO HIT
Refinancings made up almost half of Asia Pacific loan volume in 2011 and market players expect a similar trend for 2012.
More than $100bn of loans were due in 2012, with the abundance coming from the major loan markets, Australia, Hong Kong, Singapore and Taiwan.
DBS Bank’s managing director for syndicated finance, Boey Yin Chong, said in November that refinancing could be theme of 2012.
“Against the backdrop of a potential economic slowdown for Asia, dealflow will be slower and driven mainly by refinancing, in the commodity, power and real estate sectors among others,” Boey said.
However, expectations for these growing markets hinged on how they would evolve in the face of increasing volatility.
A corporate banker with an Asian bank said, “The overall sentiment in the credit market is uncertain. Many lenders have become prudent, extending credit lines only to core clients, and this is likely to kill off some of the upcoming refinancing deals from secondtier credits.”