FA: Are the Asian loan markets a good place to raise finance at the moment?
Bindra: Yes, because at the moment the markets are very, very liquid. You can see by the way that the spreads have been falling over the last twelve to eighteen months, that the market is hungry for good assets and it's a good time to raise money - especially for the best credits.
FA: Where is the liquidity coming from?
Bindra: Because Asian economies have not fully recovered from the crisis and consumer confidence is not as strong as it should be, people are not investing inequity or real estate. So most of this money is sitting on deposit with the banks. Banks are flush with liquidity as their consumer portfolio is not growing and over all they are cautious about lending to SME's
FA: Historically speaking, how cheap is money at the moment?
Bindra: To give you an example, for Hong Kong, Singaporean and Korean top tier credits, spreads at almost at the pre-crisis levels, if not below.
FA: Do you think this liquidity situation is going to change at any time soon? Will spreads get any lower?
Bindra: I think it will probably continue at this level for a while - at least the next three to six months. I think a lot depends on whether there is a soft or hard landing in the US and what the global reaction will be to that. If there is a hard landing and US companies run into trouble, then there will be a lot of concern about bank credit, which will result in a tightening of credit . The ripple effects of what happens in the US will be felt throughout Asia as Asia is very closely linked to the US.
FA: Given that the equity and bond markets are very much closed in Asia due to these global uncertainties why are the loan markets still open?
Bindra: As mentioned above, there is a huge amount of liquidity in the region, not just the international offshore dollar market but also in the local markets particularly in Hong Kong, Singapore, Malaysia, Taiwan and Korea. The market is basically open due to the liquidity situation in both the domestic and offshore markets.
FA: What forces are driving demand for money this year?
Bindra: Some of it is refinancing deals that were done prior to the crisis. The deals that came to the market in 1998 and 1999 were mainly one or two year deals, because the markets at that time were not keen for longer maturities. Since then spreads have come down and as most loan agreements do not have penalties for refinancing, the borrowers are obviously looking to do that. So at the moment it's a combination of (1) refinancing deals done before the crisis that are up for renewal (2) refinancing the short maturing deals and (3) telecom deals which still account for a significant portion of the market, even though banks are becoming very selective about which deals to do. Banks will do telecom deals, if the sponsors are good, the deal makes sense and the pricing is right. In the next six months I think we will see $5 billion or $6 billion worth of telecom deals come to the market.
FA: Moving on, you recently arrived here at HSBC. What is your mission?
Bindra: In the past, HSBC has always been a dominant player in the Hong Kong and China market. However, we have not been as active as we should have been in the regional markets. My task here is to try to build up the regional business .We want to be one of the top players on a regional basis, not just in Hong Kong. The bank has been here for over a century and has tremendous relationships throughout Asia. There are only a few houses that have consistently been here for as long as HSBC. Many banks come and go. As a result our relationships are very, very solid throughout the region.
FA: Well how are you going to turn the strength of these relationships and the appetite for new lending into new business?
Bindra: What we are trying to do is really build up the team so that we have people on the ground in every market. There is a trend towards local currency business, so we will have a regional team doing offshore deals and people on the ground in every market doing local deals. They will be the ones who originate the local and the offshore deals
FA: How is the loan product perceived within the bank?
Bindra: Traditionally credit has been one of HSBC's strengths. The bank's position now is that we still definitely want to build up the business. We have always been willing to lend throughout Asia, provided the credit is good and the deal makes sense.
FA: What differentiates your loan capabilities from those of other houses?
Bindra: We have a strong presence on the ground in nearly every country in Asia. Not many other houses have that. Also the business will be run on an integrated business i.e. both onshore and offshore. I don't think any other house has that.