Syndicated bank loans in freefall

Syndicated bank loans in Hong Kong plunged 41% in Q3 to HK$10.5 billion from the HK$17.7 billion in Q2.

Volume this Q3 dropped 25% to HK$32.4 billion compared to HK$43.4 billion year-on-year. The massive retreat came as large companies fled the local loan market for bond financing and bilateral loans.

Asia-Pacific, excluding Japan, syndicated loan volume reached HK$224 billion in the first nine months of 2012, down 36% from the $351 billion in the same period last year.

In this third quarter, syndicated loans came to HK$52.2 billion in the Asia Pacific, down 57% from the HK$121.1 billion year-on-year. This represented the lowest quarterly volume since the first quarter of 2009 (HK$47.1 billion).

Hong Kong bankers expect lending fpr the rest of the year to stay flat as many companies have already refinanced maturing loans via bonds or bilateral deals.

Companies are also choosing to issue bonds to benefit from cheaper funding costs compared to bank loans, a trend that became more marked after international credit rating agencies stopped downgrading Asian companies further.

More international institutional investors are also investing in Asia-Pacific bonds for stable returns, thereby ensuring that new bond issuances will be well received.