Financial problems' spur securitisation

Business Asia, Nov 2, 1998

Financial problems in Asia are acting as a spur to Australia's securitisation market, according to Mr Stephen Gustafson, head of the Australian arm of the Deloitte Touche Tohmatsu Global Securitisation Group.

Mr Gustafson said the Asian crisis offered an interesting conundrum.

While the region's problems have contributed to a "flight to quality" by investors, thereby widening margins in the local market, these same problems have been a benefit to securitisers in many Asian countries.

"Structured finance solutions are now far more popular in many of these countries, as traditional sources of debt have dried up with declining credit quality," he said.

Mr Gustafson said the Australian securitisation market had continued to grow at record rates in the past 12 months despite uncertainty over the Australian economy.

In the recently released Deloitte Securitisation Index on Australian and International securitisation trends, Mr Gustafson said 1997-98 continued the boom of recent years, with the securitisation market growing an impressive 64 per cent on the previous year. This was despite widening margins on assetbacked securities.

This 64 per cent growth comes on the back of growth rates of 56 per cent for the year ended June 30, 1997, and 51 per cent for the year ended June 30, 1996.

"The 1997-98 year has seen new ground broken for the Australian securitisation market. We have seen major issues into the US and Euro markets, the continued diversification of asset backing with deals involving corporate loans, auto loans, and commercial property, and a significant increase in the number of issuers," Mr Gustafson said.

He said it was particularly interesting to gauge the impact that Australian and global economic uncertainty was having on the Australian market.

"Economic uncertainty has seen a return by many to the liquidity of government bond markets. This has contributed to the drift in margins on securitisation issues during the year.

"While pricing of recent mortgage backed issues has been relatively constant, trading in both senior and subordinated bonds has been at margins 20 per cent to 60 per cent higher than last year. This has certainly led to a rethinking of securitisation strategies by some parties."