Barclays Capital's largest Europe-based ABS investor clients can expect their ABS portfolios to grow at a weighted average of 10% for the next 12 months, according to the bank's third annual European ABS investor survey. That represents a decline from last year's result.
"However, as many investors have put reinvestments on hold and are retaining cash from redemptions, we believe that growth in European ABS demand for 2008 is approximately 10% to 15%," wrote the report's authors, Hans Vrensen, director of European securitization research at Barclays Capital and analyst Anca Badea.
Respondents said they expected primary growth issuance for 2008 to be 18% below 2007 levels and most respondents believe that as a result issuance will be lower in 2008, compared with 2007. "However, as there has been no placed issuance since July, and with the current historically wide spread environment, we would not expect any meaningful primary issuance in the short term, since it is not economically feasible for issuers," reported Barclays. "Therefore, we believe that the respondents' primary issuance forecast of [minus] 18% is unrealistic and expect it to be more responsive to potential spread tightening."
Investors said that better means of disclosure on collateral pools, secondary liquidity levels and overall deal structuring topped their list of concerns for 2008. Vrensen and Badea added that the importance of investor opinion is especially relevant considering the current uncertainty in the European asset-backed securities market. "By better understanding the investor base, we hope also to better understand market supply and demand in pricing and other trends," they said.
Going forward into 2008, investors hold differing views on spreads across the continent for the year. Most anticipated is a widening of spreads at the triple-A levels in nonconforming RMBS in the United Kingdom and Spain. And at the triple-B level as well, investors expect further widening in U.K. nonconforming RMBS, as well as in U.K. prime and in Spanish RMBS and CMBS, the four key European ABS sectors.
"In terms of secondary trading in European ABS," they added, "we note that on average, 16% of respondents' ABS assets were bought in secondary, up from 11% last year. Also, secondary trading for 2007 was estimated at 181 billion ($268 million), up 61% from last year."
However, the survey is not without its limitations. The Barclays team noted that the transient nature of European ABS staff over the last year means that only 26 of the 50 respondents of the 2007 survey also contributed to the 2006 survey.
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