Asian securitization issuance is expected to continue its steady - if slow - growth this year, with rating agency Moody's Investors Service predicting a total of $2 billion of cross-border deals from non-Japan Asia in 2001, compared with 2000's $1.64 billion and 1999's $1.49 billion.

The majority of that will come from South Korea, which has been the busiest securitization market since the Asian financial crisis. Along with the non-performing loan-backed deal from the Korea Deposit Insurance Corp, which is expected to be worth more than $400 million and should come around the end of the first quarter, the agency expects issuance backed by performing assets including auto loans and equipment leases.

The other bright spots should be Singapore and Hong Kong, though issuance in both will be limited because the banks in both jurisdictions are awash with cash, meaning that they have little economic incentive to issue securitizations. The ample liquidity also means that most corporates are unlikely to need to turn to securitizations because they can borrow relatively cheaply.

Even so, the Singapore government's commitment to developing its capital market in general and securitization in particular may lead some firms to access the ABS or MBS markets, according to Moody's analyst Jerome Cheng. "The government has got a lot of influence in Singapore and that may mean that deals happen as they try to promote the market," he said.

In Hong Kong, on the other hand, the economics mean that the likely absence of securitization from the banks and large corporates could lead to the market being dominated by relatively small non-bank financial companies for whom using their assets - such as credit card receivables and personal loans - to raise funds is the most efficient option.

Synthetic securitization - which made its non-Japan Asian debut in Hong Kong last year with an MBS issue from ABN AMRO worth HK$1.107 billion - may allow Taiwan to take a bow as it solves many of the problems with withholding tax and asset transfer that has stopped securitisation from developing on the island. Again, ABN AMRO, which has large loan and mortgage portfolios in Taiwan, may take the lead.

Elsewhere in non-Japan Asia, issuance is likely to be muted by political instability or ample local liquidity. One exception may be Malaysia, where Nomura International is working on a transaction for silicon wafer manufacturer 1st Silicon that will bring the European concept of whole business securitization to the region.

The concept of whole business securitization will be a valuable addition to Asian securitization, said Cheng, as it may allow many relatively small Asian corporates to access the market despite not having large asset pools that make a traditional securitization possible.

Unlike traditional securitization transactions in which there is a "true sale" of assets, in whole business securitization the issuer will normally grant the borrower a loan secured by a charge over all or most of the borrower's assets. Certain jurisdictions, such as the UK, allow holders of this type of charge to control the insolvency proceedings through the appointment of an administrative receiver, which greatly alleviates the uncertainty in security enforcement caused by the insolvency of the borrower.

Since whole business securitization is heavily dependent on well-enforced bankruptcy regimes that offer specific protection to secured creditors such as those in English law, its application is likely to be restricted to Hong Kong, Singapore and Malaysia, the three jurisdictions with bankruptcy regulations derive from English law, Cheng added.

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