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Loans in Asia recover as borrowing costs slide

Bloomberg

Syndicated lending in Asia rebounded last year as companies boosted borrowing to take advantage of the biggest drop in loan interest rates in a decade.

Borrowers led by China National Offshore Oil Corp (中國海洋石油公司) and Origin Energy Ltd pushed lending volumes in the Asia-Pacific region outside Japan to US$423.6 billion last year from US$387.6 billion in 2012, according to data compiled by Bloomberg.

The average interest margins charged for US dollar-denominated loans shrank 23 basis points, the most since at least 2003, to 267 basis points, the data showed.

After sliding 16 percent in 2012, the amount of loans jumped last year ahead of moves by the US Federal Reserve to unwind record stimulus policies that had caused volatility in the bond market and helped lower loan prices.

US dollar bond sales in the region fell almost 50 percent to US$44.9 billion in the second half of last year from US$82.6 billion in the first six months.

“Price tightening in the loan market had a positive impact on overall volumes in 2013,” said Priscilla Lee, the Hong Kong-based head of northeast Asia loan syndications at Bank of Tokyo-Mitsubishi UFJ Ltd. “Spreads are unlikely to drop further this year.”

Interest margins fell in eight of the 11 Asia-Pacific loan markets last year, according to Bloomberg-compiled data.

In Hong Kong, where average margins narrowed by 55 basis points to 230, syndicated facilities surged 81 percent to a record US$63.4 billion, the data showed.

Volumes in Australia climbed 24 percent to US$103.7 billion after loan pricing dropped 62 basis points to 243 basis points.

“There’s still downward pressure on pricing, so we’ll continue to see margin contraction,” said Phil Lipton, Hong Kong-based head of syndicated finance for Asia-Pacific at HSBC Holdings PLC.

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