The nation’s structured credit market, which experienced a freeze in securitization activities last year, will continue to suffer from excess liquidity and low interest rates for the next two years, analysts at Fitch Ratings said yesterday.
“From a bank originator’s perspective, given that there is excess liquidity within the financial system, together with stagnant loan growth and low corporate impairment losses, there have been limited incentives for local banks to securitize their existing credit books,” April Chen (陳怡潔), associate director of the rating agency’s structured credit business, told a media briefing yesterday.
The market segment peaked at a volume of NT$230 billion (US$7.2 billion) in 2006 before dramatically declining to zero issuance activity last year, the agency said.
On the demand side, some local fixed-income investors, mainly insurance companies, retained their appetite for domestic corporate structured credit paper. This, however, was limited to very senior tranches with simple structures, she said.
Meanwhile, the nation’s real estate asset trusts (REATs) and real estate investment trusts (REITs) will maintain an outlook rating between “stable” and “negative”, pending their underlying properties, although their asset performance may lag behind the economic recovery, analyst Henry Hung (洪碩亨) told the same briefing.
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