With a global recession looming, many factors point to increased demand for ECA financing and liquidity. Banking regulation on long-dated, liquid loans has had severe implications on available bank liquidity and the cost of funding, paving the way for institutional investors, asset managers and secondary market distributors to step in. While better placed to pick up the slack, what are these investors thinking in the current environment, and what is their appetite for ECA backed debt? How does this compare to other asset classes including bond markets? In the current landscape of continued uncertainty, how much capacity do investors have for new risk?
According to TXF data, Asia and Asia Pacific combined contributed just 9.1% of global export finance volumes in 2020. Despite this, the region is renowned for a strong borrowing market with its eyes set on the pipeline for 2021. We gather some of Asia’s leading borrowers to consider:
While ECA financing becomes a more lucrative option for exporters and borrowers, how are international and regional banks coping in the current market state? How are pricing structures shaping up? How has their risk appetite for certain countries (such as Lebanon, Egypt, and Iraq) and for certain sectors (such as infrastructure and utilities) evolved? Are banks still able to provide enough support to their clients? Have opportunities for new partnerships or collaborations cropped up to provide more liquidity and favourable terms to borrowers? Are Central Banks providing enough support via their stimulus packages and payment delays or are more support measures required? Will we see an increase in more structured products rather than short-term loans as lending appetite decreases?
In the light of Covid-19 we ask heads of units that include export, project and trade finance their view on the future of export finance as an asset class within their wider group strategy. With a global recession looming do we expect to see an uptick in business due to the countercyclical nature of export finance? How will the drive for sustainability and demand for green infrastructure investment shape the groups’ strategies? In today’s landscape of price compression and rolling regulation, how is ECA finance perceived? What does this mean for the future of large ECA finance teams? What is the role that banks will play in structuring ECA transactions given liquidity from institutional investors and ECA direct lending? What is the effect of digitisation and innovation within trade and export finance and the types of transactions banks favour? Has digitisation been accelerated by the pandemic? Will we see a shift away from financing long tenor illiquid assets in favour of new fast-moving industries?