Along with a continued push in the CLO sector, the CPDO contagion is likely to reach the Asian market this year, as an increasing number of arrangers in the region are inquiring about structuring the deals, according to Moody's Investors Service. Ex-Japan Asia is expected to be a boom market for CDOs, as money continues to chase emerging market credits in search of yield, and the region's banks look to lift risk from their balance sheets.
Arbitrage synthetic CDOs and synthetic balance-sheet CLOs are likely to remain key areas of interest in the region this year. Standard Chartered Bank issued two deals last year with portfolios heavily concentrated in Asian credits, and Calyon in Hong Kong issued the similarly weighted Daphne Finance 5 plc, said Myrna Fajardo, vice president and senior credit officer at Moody's. Earlier this month, private equity firm Clearwater Capital Partners launched the first publicly rated CLO backed by Asia ex-Japan distressed debt. The offering was small, at only $146 million, but it signifies the growth many say is overdue in the Asian credit markets outside of Japan.