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Global credit rout to hurt structured bonds: Moody's

Sales of asset-backed securities and other structured bonds in China, Hong Kong and Taiwan are likely to rise slowly this year, hamstrung by the global credit market rout, Moody's Investors Service said.

Borrowers in the Greater China region sold US$5.2 billion in securities linked to bonds, loans or other assets last year, 46 percent less than in 2006, Moody's and its Beijing-based affiliate China Chengxin International Credit Rating Co (中誠信國際) said in a statement yesterday.

The amount of the bonds sold in China fell below the 60 billion yuan (US$8.5 billion) expected, as the nation's market conditions were not favorable to domestic transactions during the first half of last year, and no cross-border deals closed last year, Moody's analyst Dominique Gribot-Carroz wrote in the report.

In Hong Kong, no deals closed last year as the markets provided abundant alternative avenues of funding, Moody's said.

The credit agency said issuance in Taiwan was dominated by five collateralized bond obligations out of a total of 11 deals.

"Of note, in Taiwan there were two asset-backed securitization deals closed in 2007 with new types of underlying asset to the Taiwan market," Cheryle Chang (張欣如), a Moody's analyst, said in the report.

If worldwide debt capital market conditions improve, Gribot-Carroz said residential mortgage-backed securities (RMBS) and collateralized loan obligations could emerge in Taiwan this year.

As and when market conditions normalize,Moody's also sees "potential for new cross-border securitizations from China and a few RMBS in Hong Kong,'' Gribot-Carroz said.
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