Asia's credit market: viable source of project funds for companies

But coping with the huge demand will be a challenge for banks and capital markets in the coming years according to Standard and Poor's.

In a release, Standard & Poor's Ratings Services President Douglas Peterson said Asian credit markets have the opportunity to help fill the funding gap for companies and projects in the region that could struggle to tap sufficient and cost-effective funding from traditional banking sources.

Standard & Poor's estimates that bank loan and debt capital markets will need to finance more than US$40 trillion of corporate borrowings between now and mid-2017 in the world’s biggest economies  like U.S., Europe, China, and Japan. This amount comprises outstanding debt of US$30 trillion that requires refinancing. A significant portion of the overall financing task resides in Asia estimated at about US$7 trillion in China and US$6 trillion in Japan.

“Coping with the huge demand for credit will be a challenge for banks and capital markets in the coming years,” Mr. Peterson told a lunchtime seminar at the 45th Annual General Meeting of the Asian Development Bank in Manila. "Given the stretched banking systems across the globe, alternative sources of financing will need to be to be found, and we believe that Asian credit markets – if developed further – have an opportunity to help fill the funding void.”

Mr. Peterson said the region’s policymakers – who have the added burden of finding sufficient funds to pay for ongoing growth and development, particularly in the area of infrastructure – have the challenging task of more effectively channelling surplus savings within the region. That will be key to stimulating domestic demand and tackling ongoing global imbalances.

"Standard & Poor’s remains deeply committed to helping develop and connect the region’s capital markets," Standard & Poor's Executive Managing Director and Head of Asia-Pacific, Yu-Tsung Chang, said. “Standard & Poor’s ASEAN and Greater China rating scales meet market needs for transparency. The ASEAN scale enables intra-regional credit risk comparisons and the Greater China scale supports the wider use of the fast-growing renminbi currency,” he explained.