Securitisation World Asia 2004 Conference Opening Remarks by Mr Ng Nam Sin, Executive Director, Financial Centre Development Department, Monetary Authority of Singapore, 19 Oct 2004
1 Good morning ladies and gentlemen, it gives me great pleasure to welcome you to Singapore for Securitisation World Asia 2004. Indeed, we are pleased to see the event organised in Singapore for the third time, and that it has again, attracted so many participants.
2 In Asia, securitisation is now considered an essential fixed-income product offering that provides for a very versatile funding technique. We see Asia's debt markets continue to be transformed by such innovative products for raising capital, alternative risk transfer and the creation of customized investment opportunities.
3 Based on an international credit rating agency's report, Asia's cross-border securitization has tripled from 1999 to a record year in 2002. Asia-Pacific has reached the stage in which markets are primed to fully exploit the benefits of structured financings, especially synthetic structures and CDOs. A wide variety of structures, both managed and static transactions, as well as arbitrage deals have come to the Asian market, a trend also evident in the European CDO scene. The emergence of a healthy investor appetite for such instruments has also been helpful for the development of this market.
4 In line with this tremendous growth in the Asian market, Singapore's ABS market has also expanded. I would like to take this opportunity to share some of Singapore's developments in this arena and some of the initiatives that we have undertaken.
Singapore's Securitisation market
5 Over the past 5 years, our debt market have broadened and deepened with structured markets forming an essential part. To facilitate the use of asset securitisation as an alternative form of financing, guidelines on the capital treatment for asset securitisation and credit derivatives were introduced in 2000. This encouraged greater participation by banks, as it provided greater certainty on the risks and responsibilities associated with such transactions. In 2001, we also introduced investment guidelines for insurance companies, allowing them to invest in credit derivatives for hedging or more efficient portfolio management purposes. This effectively opened up an important investor base for the ABS/CDO market.
6 Today, the asset securitisation market has taken off. It has grown about 5 times in size since 1999. We have seen an entire range of structured debt securities including equity linked notes,credit linked notes, asset backed securitisation , CDOs etc. They have grown on the back of the corporate debt market.
7 Asset securitisation deals that have come to our market include those backed by credit card receivables, loans, real estate and progressive payments from yet to be completed properties. Just a few months ago in August, Singapore saw its first fully managed Singapore dollar-denominated synthetic CDO.
8 Some of you may have heard that Singapore's first loan securitisation programme for SMEs will soon be launched as well. By pooling a well-diversified portfolio of SME credits, the capital markets can potentially be a viable avenue for SMEs to raise funds. This will provide SMEs with an alternative source of funding, essentially creating a new asset class for securitisation in Singapore. This transaction will add to the diversity of products within the securitization market, broadening and deepening the market.
9 The market for REITs in Singapore has also grown substantially. There are currently 4 listed REITs on the Singapore Exchange with a total market capitalization of S$4.6 billion as at August 2004. We are also pleased to have attracted the first cross-border REIT in Asia with the local listing of Fortune REIT from Hong Kong last year.
10 This development of a successful REITs model in Singapore has also helped to facilitate the growth of the CMBS market in Singapore. These REITs have used CMBS to finance their acquisition of commercial properties, thus facilitating the growth of the CMBS market.
Creating a conducive environment
11 We are pleased to note that industry players now recognise Singapore as an important hub for derivative products in Asia. We will continue to encourage the development of the securitisation market in Singapore by ensuring a tax friendly environment here. In fact, we are looking at announcing the details of a concessionary tax treatment on onshore Special Purpose Vehicles engaged in such transactions. With this, industry players would be able to achieve tax neutrality for securitisation vehicles here.
12 Asia's financial landscape will continue to be transformed by securitisation through innovative product offerings. This will add to the breadth of debt market benefiting its participants by providing greater flexibility. We believe that Asia's securitisation volumes will continue to increase steadily in tandem with the growth of the Asian economies. On that note, I wish you all a fruitful discussion over these next 2 days.