Taiwan's securitization market has achieved an encouraging start with indications of strong interest and activity less than a year after its formation, Moody's Investors Service said in a just-released special report entitled Taiwan's Securitization Market -- a Bright Outlook.
Moody's believes that the nascent market has solid potential to develop into a full-fledged market. And the pace of this development depends on how quickly the essential building blocks are introduced.
The rating agency believes that a faster-than-expected take-off cannot be ruled out, in light of the government's commitment and the fundamental elements that are already in place.
"The government's swift response to market needs is indicative of its commitment to nurture the market," said Shirley Chan, the report's author and a Moody's analyst.
Moody's is optimistic on the market's growth prospects, given that Taiwan has a relatively sizeable economy with a large pool of securitizable assets and a wide base of prospective institutional investors. The potential benefits of securitization are also evident. Both issuers and investors will benefit with the new respective choices in financing sources and investment tools, it added.
Despite the outstanding legal and infrastructural hurdles, many potential participants flocked to the market as soon as it was launched and various asset-backed deals are already in the pipeline. Two were consummated so far since the market's launch last June.
Moody's emphasized that supplementary legislation, improvements in market infrastructure, education of participants and improved efficiency of the debt capital market -- are essential for the market's long-term development.
The agency cautioned that the process could take some time, especially if the coordination of various authorities is required. It said other aspects -- such as the banking system's abundant liquidity, the easy availability of bank credit and the slow process of banking disintermediation and consolidation -- may curb issuer demand in the interim.