De-Globalization

[rffrydr]

De-globalisation

Published: May 29 2009 09:47 | Last updated: May 29 2009 12:15

Life after the crisis, says Bill Gross of Pimco, will be characterised by DDR: De-leveraging, De-globalisation and Re-regulation. There is evidence aplenty of the first and last. And of the second, there are few better illustrations than the Asian loan market.

In the years before the credit bust, Western lenders swarmed all over Asia. Heads of corporate and investment banking would knock on the doors of any finance director who would listen. They may have known next to nothing about the business, but the bankers would be safe in the knowledge that their sales pitch was backed by a vast, cheaply-funded balance sheet.

Now they are beating a retreat. Three years ago, among the top 20 arrangers of syndicated loans in Asia, excluding Japan and Australia, non-Asian banks had a 29 per cent market share. So far this year, their share is 7 per cent. Five non-Asian banks were in the top 10 in 2006; now there are two. In league table terms, BNP Paribas, Citi and HSBC have slipped the most.

Western lenders may well hope to return, some day. Outside clubby Japan and Australia, Asian loan markets have tended to be driven by transactions, rather than relationships. A lender might just be forgiven for sitting out now if it comes back in a few years offering the same dollar at a better price.

But while foreign banks save capital to lend to their best clients at home, they may find that the world’s growth engines get on fine without them. Asian banks account for about 3 per cent of the $1,474bn written down globablly so far. For every dollar lost, US and European banks have, meanwhile, raised 80 cents; in Asia, they have raised $1.68. Domestic lenders able to deploy their healthier balance sheets now may pick up ancillary business – FX swaps, equity issues, M&A mandates – that they will not surrender lightly. For the interlopers, market share that was easily won will be just as easily lost.
_________________
Today is the Tomorrow you worried about Yesterday!