How do you expect the Asian loans business to develop in 2002?
I am reasonably optimistic. The main volumes will be in North Asia, with the exception of Singapore and Australia. In Australia it will be pretty diversified again, while in Singapore we'll see more real estate and government-linked companies coming to market. Hong Kong will also be dominated by real estate.
With spreads getting tighter, there will be an increasing tendency to lengthen maturity and relax covenants, of which we saw some last year. I hope that lenders will be less willing to do so in 2002.
Some of your competitors are getting excited about future opportunities in China? How difficult it is to secure mandates from that market?
To be honest with you, it's never been difficult to win loan mandates as long as you are willing to price tightly. What you will see in the first quarter next year is two or three large project related deals, all of them in the petrochemicals sector. You will also have an increasing number of red chip deals coming to the market.
As to whether we will see a large spike of deals in China I don t think so. The market will continue to evolve steadily.
How would you assess the past 12 months for the Asian syndications business?
The year was pretty good for HSBC because traditionally we have been very active in Hong Kong but not as strong on a regional basis. In the past year, we have spread our wings and have done deals in almost every country in the region.
For the market in general, volumes are probably down a little for the Asia Pacific region, especially if you include Japan.
In the rest of Asia, the numbers in 2000 were high because of the $12 billion PCCW deal, which boosted the figures significantly. If you excluded that, I think you could say that the market has been pretty active.
What was the year characterized by? What types have deals did we see?
In Australia, we saw a lot of corporate loans. In the last three or four years the market was characterized by privatizations. However, that has changed and over the last 12 months or so we've been seing more of the traditional corporate loans with borrowers like BHP coming to the market. Just lately, there have also been a number of buyout deals. All in all it s diversified, lively market that isn t dependent on just project related or privatization transactions.
In Hong Kong, as always, the market was dominated by real estate, with a little bit of telecoms. That situation also applies to Singapore if you look at the major deals that were done there.
Korea has seen a lot of bank deals and a couple of buyouts. In Taiwan, the market is mainly a domestic one and is focused mainly on tech companies. The Philippines has seen some telecom deals, while Thailand has been pretty quiet.
In Malaysia, the market has picked up recently and refinancing is drawing most of this.
The Hong Kong market has been characterized by tighter pricing and lower fees. Can we expect that to continue?
A lot will depend on the liquidity situation. The reason why spreads are so fine is because there is so much liquidity in the market, and that's probably true for some other countries in the region as well.
The real estate market has not been doing well, nor has the stock market, so people are keeping their money in the banks. Also banks are not lending to small and medium enterprises so that sector is not getting its fair share of the loans. As a result of that, all the Hong Kong banks have a tremendous amount of liquidity. There's a heavy concentration towards the top end of the market. That is why there has been such a compression of spreads. Those who can borrow are getting really fine pricing.
