South Korean cross-border issuance of ABS will be spurred along by two developments in 2011, according to a report on structured finance in ex-Japan Asia by Moody’s Investors Service. One is the maturity of several credit-card and auto loan deals this year. The other is the arrival of potential new originators among credit card businesses freshly spun off by banks.
Bank of Korea predicts 4.5% economic growth in 2011, on the heels of last year’s estimated 6.1% expansion.
With this fairly auspicious backdrop, Moody’s sees Korean receivables continuing to show low delinquencies. There are caveats though. “The housing market is still stagnant, with low transaction volume and unsold units remaining over 100,000 as of September,” the agency said. Highly indebted households could also feel more pinched if the Central Bank follows through on hints that it will further increase interest rates as a way to combat inflation.
In addition, the domestic ABS market has to contend with the scheduled adoption of IFRS this year. Already last year, banks were reluctant to securitize CDOs and NPL-backed transactions ahead of this change.
Deals backed by project-finance loans accounted for 40% of domestic Korean issuance in 2010. On the cross-border front there were nine deals, with credit cards, auto loans, airline receivables, and mortgages in the mix. The country’s second covered bond came out as well.