More synthetic securitisation expected in Singapore in 2003

Singapore is likely to see more synthetic securitisation deals in 2003, according to Diane Lam, a Hong Kong-based director in Standard & Poor’s structured finance group.

“The Singapore securitisation market has outperformed our initial expectations, not only in terms of the number of transactions completed, but also in the complexity of the structures,” Lam said in a report. “In 2002, Standard & Poor’s had one of the most active years in Singapore and rated four transactions, with volumes totalling nearly US$1.7 billion.”

According to Lam, 2003 “should be a good year, building on last year’s developments”. The growth of managed arbitrage CDOs is likely to continue, with a number of asset managers looking at following the steps of UOB Asset Management, which closed two transactions last year, she added.

Singapore institutions could also look at synthetic residential mortgage-backed securities (RMBS) as a way to transfer risk and to manage their mortgage portfolios more efficiently. Lam noted that “synthetic RMBS would be a good fit for Singapore”.

Synthetic collateralised loan obligations could also be popular among Singapore banks seeking free-up capital to expand geographically or to develop new businesses, Lam said.