RT Journal Article
SR Electronic
T1 Agnosticism in Pan-Asian Structured Finance
JF The Journal of Structured Finance
FD Institutional Investor Journals
SP 43
OP 46
DO 10.3905/jsf.2019.25.1.043
VO 25
IS 1
A1 Jeffrey H. Chen
YR 2019
UL https://pm-research.com/content/25/1/43.abstract
AB Fixed income investors doing Asian cross-border deals have become increasingly agnostic in the types of transactions they are now engaging in, departing from the “safe” high-quality credit portfolios that underlie traditional securitizations and venturing into nontraditional asset classes and structures such as equity hybrids, mezzanine debt, single-asset or single-issuer deals, real estate, and distressed debt. These trends are driven by the chase for higher yields. Increasingly, a double-digit internal rate of return is becoming the predominant determinant for whether or not to do a deal. In Asia, however, foreign exchange controls and currency mismatching remain the biggest challenges to realizing such high levels of return. Cross-border movements of capital and currency conversions are often strictly regulated by central banks. Even where and to the extent permitted, the risk of local currency depreciation requires cross-currency and other types of market hedging, the cost of which may well render the proposed deal unfeasible.TOPICS: Fixed income and structured finance, international investing, real estate, risk management, interest-rate and currency swaps