Fitch Ratings today said it expects the outlook for structured finance markets in Non-Japan Asia to remain stable to positive in 2006. In its recently released report '2006 Global Structured Finance Outlook: Economic and Sector-by-Sector Analysis', the agency's analysis of global structured finance markets included an overview of and outlook for countries and regions like the Chinese mainland, Hong Kong, Taiwan, Singapore, South Korea, and Thailand, and to a lesser degree, emerging countries, Philippines and Indonesia. As these markets demonstrated stable economic growth in 2005, Fitch expects structured finance performance to continue to do well through 2006.

Fitch further highlights two emerging trends within the Asian CMBS market in the report. These include jurisdiction diversification, with prospects in China, Indonesia, and Korea, and higher leverage by REITs as permitted by the relaxation of local REIT regulations in countries and regions like Singapore and Hong Kong.

The agency also notes that the credit quality of existing CMBS transactions improved due to a modest improvement of underlying property fundamentals. This is demonstrated in part by the fourth quarter 2005 upgrade of Winmall Limited in Singapore.

The Asian ABS market saw the first future flow transaction from Indonesia since 1997, with structured export notes backed by receivables issued by PT Kaltim Prima Coal and PT Arutmin Indonesia. This transaction was rated 'BBB-' (BBB minus). More future flow transactions are expected as a financing source for companies in emerging countries. Fitch also identified rising consumer debt levels in Taiwan as a factor which may continue to put pressure on consumer ABS transactions in 2006. However, Fitch believes existing transaction structures are robust enough to withstand this negative trend.

The fourth quarter of 2005 and first quarter of 2006 are expected to be dominated by CBO issuance in Taiwan because of a regulatory motivation for bond funds to liquidate inverse floater securities. These structures, however, are expected to subside before the second quarter of 2006 as the structured notes are all repackaged.

Fitch also notes several inaugural CDO deals that are experimental in nature have been securitised recently as more Asian banks are realising the usefulness of CDO technology, including a synthetic balance sheet CDO in Singapore, a cash flow primary balance sheet CLO in Taiwan, and a CDO CLO in China.

By People's Daily Online