SINGAPORE Trends and Developments Contributed by: Doos Choi, Mayer Brown
Introduction When it comes to assessing the private credit market in Asia, outside of the legal and regu - latory framework applicable to each individual jurisdiction, we would suggest it is something of an artificial (and potentially misleading) exercise to break down the commentary by individual ter - ritory. A given territory may be the flavour of the month for any number of reasons, and it is rare for a private credit fund to be focused exclu - sively on a single territory in Asia. For readers based in other parts of the world, it is easy to forget that Asia is a diverse collection of emerging and developed markets. Unlike the US and Europe, Asia does not benefit from any degree of homogeneity in its economic, legal or regulatory landscapes which can present unique challenges and opportunities. In terms of financ - ing (and indeed other commercial) activity, Hong Kong is the natural hub for North Asia, and Sin - gapore is the natural hub for Southeast Asia. That is not to say if you are based in Hong Kong, you will only look at North Asia (and similarly the view from Singapore would not be locked purely on Southeast Asia), but proximity to the relevant markets naturally serves as an advantage for each of these hubs. Any conversation about private credit in Asia will be anchored on Hong Kong and Singapore, not because most of the capital is deployed within these territories, but because the majority of funds are based in either or both of these city states for the purposes of raising and deploying capital throughout the whole region. Discussions about the private credit market in one will natu - rally involve discussions about the private credit market in the other. It is for these reasons that Mayer Brown has elected to author the chapters for both Hong Kong and Singapore and it is no
accident that our market commentary for these chapters has been consolidated. Market Update Activity levels in deploying private credit in Asia have been muted over the last 12 months. This may, at first blush, come as a surprise consider - ing the traditional role (and the origins) of private credit has been to fill the funding gap left when traditional bank lending activity becomes con - strained. The latter has certainly happened. The marked decline in the Asian loan market both in volume and value has been widely reported. At the same time, we have observed a decline in private credit lending activity. This can be attributed to a number of reasons including the following: • as the biggest regional economy, the PRC was the hunting ground of choice for many private credit strategies, but interest has waned in the face of the property sector crisis; • regional equity capital markets have been muted and potential issuances by Asia busi - nesses on overseas exchanges have faced increased regulatory scrutiny increasing “refi - nancing” risk and increasing uncertainty with respect to the value of “equity kickers”; • for those issuers that are able to access the domestic bank lending market, the relative cost of borrowing onshore in the PRC and other larger regional economies such as Malaysia and Indonesia has remained low compared with the cost of offshore bor - rowing. Domestic bond markets have also become more significant sources of debt capital; • the slowdown in the PRC economy has cast a pall over most of the region and whilst local bank balance sheets may be labouring under the weight of impaired property loans giving
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