(Bloomberg) -- Asia Pacific dollar loan volume outside Japan is projected to fall for a third year due to a lack of jumbo deals expected in the remaining months, bucking earlier growth predictions.
Borrowers raised over $111 billion in US-currency loans so far this year, excluding bilaterals, down 16% from the same period in 2023, according to Bloomberg-compiled data that tracks volume since 1999. If the trend holds for the rest of the year, this would be the first instance of three successive years of sales decline for the region.
Even Asia Pacific’s two biggest offerings for this year from ByteDance Ltd. and Alipay Hong Kong Ltd. — which produced a combined size of nearly $17 billion — failed to boost the numbers.
“We may end the year at a 15%-20% lower volume compared to 2023,” said Birendra Baid, Deutsche Bank AG’s Asia head of loan syndication. Syndicated volumes surged in the third quarter of 2024 due to the two large deals from China, which may not repeat in the final quarter, he said.
The decline in deal flow highlights how firms in the region aren’t raising dollar loans due to the currency’s higher borrowing costs versus local markets, and the availability of other financing options such as bonds and private credit. This has crushed predictions of a rebound in volume this year after 2023’s drop.
This year’s final three months could register a decline given that 2023 clocked more than $43 billion in the same period, in what’s among the best quarters over the last two years, according to Bloomberg-compiled data.
That said, bankers are expecting volume to pick up next year as the region continues to grow at a faster pace than the rest of the world and companies look to finance their expansion. It may take a few months for loan discussions to translate into deals as borrowers await further rate cuts from the Federal Reserve, which has begun its easing cycle.
“Borrowers are already reporting a narrowing gap between offshore and onshore financing costs,” according to Andrew Ashman, head of Asia Pacific loan syndicate at Barclays Bank Plc. “This will only continue if the US dollar rate cuts flow through as expected.”
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