By Rafael Nam
HONG KONG (Reuters) - From Chinese non-performing loans to property developers' debt, distressed assets are piling up in Asia and some investors expect a fire sale at least as big as the one during the region's financial crisis of a decade ago.
The few buyers with the cash and the nerve will have their pick of potential bargains on a range of investments that include roughly $500 billion to $900 billion in Chinese non-performing loans, to assets at small family-run firms facing trouble.
Hedge funds have been decimated by the financial crisis, while proprietary desks at investment banks in Asia are pulling back to preserve balance sheets under orders from risk-averse headquarters.
That leaves the field open for hedge funds and other specialists players that had already built up war chests, and means less competition for good assets from distressed sellers.
Many investors expect to find the best bargains in the second half of the year, as the worst global economic crisis in decades is not expected to ease until at least next year.
"For us, it is basically pulling the pages out of the playbook from during the Asian crisis and sitting down with companies to say this is what we have done in the past and what we can do again now," Edan Lee, managing director at Olympus Capital, told the Reuters Private Equity and Hedge Funds Summit.
Unlike the Asian financial crisis a decade ago, the region is unlikely to be rescued by big-spending U.S. consumers, a bad omen for economies such as Singapore and Hong Kong that have already fallen into recessions.
For Laure Wang, co-founder and managing director at fund of private equity funds manager Asia Alternatives, that means economies will suffer more than they did last decade, creating plenty of opportunities, especially in India and South Korea.
"It looks like it's going to get worse to us, but it's going to be a different type of crisis," she said.
SMALL, MID-SIZED PAIN
Small and medium-sized companies are especially vulnerable. Standard & Poor's last month warned of the liquidity challenges facing emerging corporate Asia, from capital goods to the building materials and automotive sectors.
Proprietary desks at investment banks with distressed assets could be another source of purchases for these players.
"The big banks, which are semi-nationalized now, have to shed more assets, and no matter what plan you come up with, you are still talking about the same thing: these assets have to be shed one way or another," said Christophe Lee, chairman of Alternative Investment Management Association, a hedge fund industry body.
The financial pressures squeezing companies will also lead to a growing pile of non-performing loans (NPL) at regional lenders, which have so far held up well in the global financial crisis.
That is especially the case in China, where the abundance of NPLs is traced back to a legacy of the financial system cleansing early this decade and newly soured commercial and property loans. Continued...
© Thomson Reuters 2009. All rights reserved.
| India Investment | Nov 23 - 25, 2009 | Country Summits |
| Global Finance | Nov 16 - 19, 2009 | Financial Services / Exchanges |
| Health | Nov 09 - 12, 2009 | Health |
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
