Published on 16/05/2017 5:06:22 PM | Source: Dion Global Solutions Ltd

Asia Pacific auto ABS market shows strong performance in Q1 2017; Moody`s

Posted in Industry News | #Industry #Moody's #Quarterly Result #Asia

Moody's Investors Service, a global rating agency has said that the performance of loans backing auto asset backed securities (ABS) in China, Australia and Japan remained strong in Q1 2017, and we expect this performance to continue across these markets, but to different degrees, with some outperforming others, owing to diverging economic growth trends.

At the same time, Indian auto ABS delinquencies remained higher in March 2017 than prior to demonetization, but we expect levels to decline to pre-demonetization levels by June 2017 if economic activity continues to pick up and if oil prices remain in a range between USD 40 and USD 60 a barrel,” said Moody's Investors Service in a report.

The average 30+ days delinquency rate of outstanding Chinese auto loan ABS was 0.12 per cent at end-Q1 2017, up marginally from 0.11 per cent at end-Q4 2016. The 31-60 day and 60+ days delinquency rates were unchanged at 0.07 per cent and 0.05 per cent respectively at end-Q1 2017 compared with end-Q4 2016. Overall, Chinese auto ABS continue to perform well.

Tight lending criteria by originators, lenders' full recourse against borrowers, and the low loan-to-value ratios of auto loans backing auto ABS contributed to the good performance. In India, the 30+ days delinquency rate for Indian auto ABS we rate was 14.8% in March 2017, up from 12.7 per cent in February 2017 and 9% in October 2016. The 60+, 90+ and 180+ days delinquency rates remained broadly stable at 5.6 per cent, 3.1 per cent and 1.2 per cent respectively in March, from 5.5 per cent, 3.1 per cent and 1.2 per cent respectively in February, although still markedly higher than 3.7 per cent, 2 per cent and 0.2 per cent respectively in October 2016 prior to demonetization.

In India, issuance of ABS backed by commercial vehicle, construction equipment and auto loans almost doubled to INR265 billion in the financial year ending 31 March 2017 from INR133 billion in the prior year, according to estimates compiled by ICRA. We expect issuance to grow over the course of 2017, as financing and economic conditions normalize post-demonetization.