PT  - JOURNAL ARTICLE
AU  - Jeffrey H. Chen
TI  - Agnosticism in Pan-Asian Structured Finance
AID  - 10.3905/jsf.2019.25.1.043
DP  - 2019 Apr 30
TA  - The Journal of Structured Finance
PG  - 43--46
VI  - 25
IP  - 1
4099  - https://pm-research.com/content/25/1/43.short
4100  - https://pm-research.com/content/25/1/43.full
AB  - Fixed income investors doing Asian cross-border deals have become increasingly agnostic in the types of transactions they are now engaging in, departing from the “safe” high-quality credit portfolios that underlie traditional securitizations and venturing into nontraditional asset classes and structures such as equity hybrids, mezzanine debt, single-asset or single-issuer deals, real estate, and distressed debt. These trends are driven by the chase for higher yields. Increasingly, a double-digit internal rate of return is becoming the predominant determinant for whether or not to do a deal. In Asia, however, foreign exchange controls and currency mismatching remain the biggest challenges to realizing such high levels of return. Cross-border movements of capital and currency conversions are often strictly regulated by central banks. Even where and to the extent permitted, the risk of local currency depreciation requires cross-currency and other types of market hedging, the cost of which may well render the proposed deal unfeasible.TOPICS: Fixed income and structured finance, international investing, real estate, risk management, interest-rate and currency swaps