"THE CENTRE OF gravity of the global financial markets has shifted to Asia," says the head of investment banking for the region at a top US bank over breakfast in Hong Kong. Although capital markets activity has slowed in Asia as a result of investor and issuer caution about events in the US, eastern markets are not as paralysed by a lack of liquidity as those in the west. There’s money to be put to work; the owners of that capital have just become a little more cautious as to how it should be deployed.
While the closing months of 2007 brought seemingly constant reports of losses at big banks and tightening of credit lines in western markets, in Asia China remained buoyant, sovereign funds and unharmed banks invested billions of dollars in wounded foreign institutions and deals kept closing. The leveraged buyout market is a good barometer of the difference: while private equity funds and corporates struggled to raise funds for large-scale deals in the US and Europe, Asian LBOs continued to close at an increasing rate (see graph, "Credit crunch? What credit crunch?").
| Credit crunch? What credit crunch? |
| Asian LBO volumes 2004–2007 |
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| Source: Dealogic |
Nevertheless, none of the market participants Euromoney spoke to in Hong Kong and Singapore was able to say that it was business as usual in leveraged buyouts: the Asian market is of course not immune to developments elsewhere, and although the region offers hope for participants in the leveraged finance field, the shape, structure and scale of the deals that can be done will be much changed from the first half of 2007.