Loans relating to mergers and acquisitions will be the main drivers of the loan syndication market in Asia-Pacific in the first half of 2017.
A survey by Thomson Reuters shows that 55% of the respondents stated that M&A-related transactions will be the primary market drivers during the period, while 40% identified refinancing and corporate credits will underpin the activity. A relatively small 6% of the respondents cited project finance and infrastructure loans will spur the volume in the first half of 2017.
In terms of volume, 41% of the respondents indicated that the regional loan volume will be in the range of between US$200 billion and US$250 billion during January-June, which was in line with the same period of 2016 that amounted to US$245 billion.
Another 37% of the respondents were more optimistic, noting that at least US$250 billion will be completed during the period, while 22% were skeptical as they expect the volume to decline to between US$150 billion and US$200 billion year-on-year.
By the end of February 2017, the loan market in Asia-Pacific, ex-Japan, closed 43 deals with a volume of US$13.3 billion, a significant drop compared with the same period a year ago. Northeast Asia accounted for US$2.2 billion, while Australasia contributed US$1.9 billion, and South and Southeast Asia US$400 million.
Refinancing accounted for 50.5% of the loans closed in the region for the first two months of 2017, while new money loans made up for 36.2%, and M&A transactions 13.4%. Asia-Pacific and Japan M&A volume amounted to US$2.3 billion at the end of February and was concentrated in Northeast Asia.
In terms of tenor, loans that have maturities of three years held the largest market share at 50.6% of the total volume in the first two months of 2017. Loans that carry a five-year tenor made up 32.4%, followed by loans with a tenor of 18 months at 4.1%.
Among the mandated arrangers, China Construction Bank led the competition in the first two months of 2017 with a volume of about US$1.47 billion, followed China Development Bank with US$802.75 billion, DBS US$725.76 billion, Bank of China US$607.01 billion and HSBC US$522.95 billion.