Chinese asset-backed securities grow like topsy
Issuance of securitised assets rose 61 per cent in the first half of this year and could climb to $170bn for the full year, according to research by Bank of America Merrill Lynch. But are foreign investors ready to dive in?
The answer appears to be a qualified yes. Given memories of how the US collateralised debt obligation (CDOs) market imploded 10 years ago, it is not surprising that foreign investors are cautious and generally avoid local issuers. Nevertheless, car loan asset-backed securities issued by well-known international companies such as Volkswagen, Ford Motor and others are proving popular, analysts said.
“Right now in asset-based finance in China, the area that foreign bond investors want to look at is foreign car manufacturers doing financing for auto loans,” said Alexander Batchvarov, managing director at BofA in London. “Currently this is giving a 5 to 8 per cent yield in renminbi.
This is not a yield you can get anywhere in European investment grade bonds.” Effectively, investors are putting their trust in the reputation of the US and European carmakers to ensure that due diligence on loan quality is being observed and transparency standards upheld.
So far, while the Chinese economy continues to grow strongly, the rates of delinquency on such asset-backed securities are low, analysts said. Liquidity levels have also been helped by strong issuance.
Total auto asset-backed securities issued in the first half of the year hit Rmb60bn, according to Standard & Poor’s.
No comments:
Post a Comment