The APAC credit market had a quiet first quarter in Q1 with almost half of last year’s growth. Let’s take a closer look at which APAC market segments are the strongest in this dry market.
APAC ex Japan
After a year of inflation and rising interest rates, the first quarter of 2023 in the consolidated lending in APAC ex Japan recorded USD 92.62 billion, a significant decrease of 46% from USD 172.95 billion in the same period in 2022. Financial Services accounted for 28% followed by 1% followed by 1%. By industry breakdown, Financial sector lending accounted for 45.78% of the total, while issuance from the Industrial and Material sector accounted for 13.96% and 12.77% respectively. In terms of regional breakdown, Chinese lenders continued to dominate the APAC market accounting for 41% of APAC Ex-Japan deal volume.
Something big
In line with the slow performance of APAC (Ex-Japan), the consolidated lending in Greater China decreased significantly by $48.05 billion in Q1 2023, down 48.58% year-on-year (yoy). Capital Expenditure (CAPEX) remained the most used with 50.1% of the market, followed by General Corporate Purpose and Refinancing Loans which made up 18.1% and 16.9% of the market respectively. The share of financial and real estate is 22.78%, while the share of Industrial and Materials is 10.86% and 6.89% of the total given respectively. Of all sales in Greater China, 67% of sales were in China, 24% in Hong Kong, and 8% in Taiwan.
The largest issuance in the region for the quarter was signed by Haitong International Securities Group Ltd for a combined loan of $ 2.04 billion, arranged by a group of banks led by ABC, BOC, BOCOM, CCB, CMB, HSBC, Huaxia Bank, Industrial Bank. , Maybank, Mizuho, SPDB. Sector-wise, borrowers in the Finance and Housing sector account for 22.78%, while the Industrial and Materials sector accounts for 10.86% and 6.89% of total lending respectively. Of all sales in Greater China, 67% of sales were in China, 24% in Hong Kong, and 8% in Taiwan.
Korea
Korea’s consolidated rental market recorded 32 deals in the first quarter of 2023, a sharp drop from 103 deals in the same quarter last year. If we look at the last 10 years and the number of readings for the first quarter of each year, we see increases until 2019 that decreased in 2020 and 2021 due to the effects of Covid. The first quarter of 2022 recovered quickly and recorded double the previous year due to low interest rates and the South Korean government’s efforts to stimulate the economy. This, however, was short-lived because this year, the credit market was affected by the rise in interest rates and as a result the first quarter of 2023 recorded 13.3 trillion KRW accounting for almost half the volume of the same period of the previous year. a year.
A notable agreement signed in the sector is a USD 300 million loan agreement with Kookmin Bank. The contract, with a 5-year maturity, has a premium rate of .88% above the 3-month SOFR rate and includes a condition to receive additional cash reductions if the annual ESG goal is met. The deal was led by OCBC and includes investors from Singapore, China and Taiwan. With this partnership, Kookmin Bank is the first commercial bank to issue Sustainability Linked Loans (SLL) in the Korean market.
ASEAN
According to Bloomberg data, the ASEAN credit market began 2023 with an increase in total volume of 14.1% compared to Q1 2022. USD 13.22bn this year was only half of the pre-Covid period in Q1 2019.
The increase in 2018-2019, which increased by 75% in Q1 2019, was mainly due to better business performance from strong GDP growth, which led to increased investment demand. After the pandemic of 2020, there has been a tendency to decrease with the number of sales. Factors such as Covid-19 restrictions, continued interest rate hikes to combat inflation and disruptions caused by Russia’s invasion of Ukraine, contributed to the economic slowdown and the rise in credit risk that had a major impact on the market.
Although Financials is still the most indebted sector, it is interesting to note that there is a significant increase in the financial sector compared to 2022 Q1 with 507.26%. The volatility of the market caused by the epidemic has caused delays and disruptions in construction projects, where large-scale manufacturing and construction projects are common. This can be a good way to ensure consistency and reduce the risk of delays and disruptions. The increased demand for loans included in the property sector can be seen in countries like Indonesia, which have seen an increase in construction projects in recent years, including the country’s capital moving to East Kalimantan. As the largest economy in South East Asia, Indonesia’s exports rose sharply (up 44.36% year-on-year in March 2022) on the back of rising commodity prices caused by the conflict between Russia and Ukraine.
One important item in the ASEAN Q1 2023 sales segment was Lotte Chemical Indonesia PT’s USD 1.77 billion. The borrower, which is a subsidiary of a major Korean company-Lotte Chemical, closed with a maturity of 12 years. The agreement is a financing provider for the development of its integrated petrochemical complex, Lotte Chemical Indonesia New Ethylene Project and attracted a large group of investors from around the world.