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Announcement:

Moody's publishes results of poll of APAC structured finance market participants

Global Credit Research - 06 Dec 2017

Singapore, December 06, 2017 -- Moody's Investors Service today published the results of polls it held of 60 market participants at its Asia Pacific Structured Finance Conference in Singapore on 23 November.

Almost half or 44% of respondents indicated that higher interest rates in the US, followed by monetary policy tightening in other countries, would be the main downside risk to APAC structured finance portfolios in 2018.

Moody's view is that the tightening of global monetary policy will proceed gradually over the next few years as economic slack runs out in advanced economies. Higher interest rates increase the repayment burden for borrowers of securitized loans.

However, because monetary policy will be tightened gradually, Moody's does not believe there will be an abrupt adverse effect on structured finance transactions in APAC.

The results and Moody's views are contained in the just-released report, "Structured finance - Asia Pacific: Heard from the market - Higher global interest rates a key issue".

In the same Moody's poll, 17% of respondents indicated rising household debt in China would be the main downside risk in 2018, while another 17% chose a conflict in Korea.

Moody's view is that steady economic conditions will support the performance of structured finance transactions in China in 2018. Rising household debt will pose a risk to the performance of auto loan asset-backed securities (ABS) and residential mortgage-backed securities (RMBS) in China if other unfavorable macroeconomic events, such as interest rate increases and lower employment, occur simultaneously.

While Moody's thinks that outright military conflict remains unlikely in Korea, the probability of a conflict has risen to low from very low levels.

In the event of a recession in Australia, 44% of poll respondents indicated that mortgages used to purchase investment properties would be the worst performing of the types of loans securitized in RMBS, while another 44% chose mortgages in the areas worst hit by the recession.

Moody's view is that housing investment mortgages and mortgages originated in those regions in Australia exposed to cyclical industries, such as mining, would perform worse in a recession scenario than mortgages originated in more economically diverse areas and mortgages for owner occupiers.

At another poll, half of poll respondents indicated that they had not yet invested in Chinese ABS, but would consider doing so in the next three years.

A total of 21% of respondents had invested in Chinese ABS on either the interbank bond market or through stock exchanges.

Moody's view is China's structured finance market will continue to grow in the coming years on the back of further liberalization of Chinese financial markets. Moody's believes the variety of assets backing securitization transactions in China as well as volumes will increase.

Looking beyond just China, market participants expect the development of structured finance markets across APAC to continue. According to discussions at the conference, two areas that will likely be beneficiaries of this development are infrastructure finance and consumer finance, although both are facing specific sets of challenges.

Subscribers can read the full report at

http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1102023

For PRC only: Neither MCO nor any of its majority-owned affiliates is a qualified credit rating agency within the PRC. Any rating assigned by MCO or any of its majority-owned affiliates: (1) does not constitute a rating as required under any relevant PRC laws or regulations; (2) cannot be included in any registration statement, offering circular, prospectus or any other documents submitted to the PRC regulatory authorities; and (3) cannot be used within the PRC for any regulatory purpose or for any other purpose which is not permitted under relevant PRC laws or regulations. For the purposes of this paragraph, "PRC" refers to the mainland of the People's Republic of China, excluding Hong Kong, Macau and Taiwan.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Vincent Tordo
Analyst
Structured Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Marie Lam
Associate Managing Director
Structured Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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