China’s asset-backed securites (ABS) market saw another year of strong growth in 2018 with surging issuance by banks, who increasingly use securitization via ABS to offload assets and improve capital adequacy ratios. While ABS issuance is still miniscule compared with outstanding loans, the market is primed for expansion with a focus on property-related assets, particularly residential mortgage-backed securities. ABS products offer higher returns than many other corporate bonds and lower risks, making them attractive to investors with limited risk appetites given rising corporate bond defaults. Recently, this even includes foreign investors, who typically avoid onshore corporate debt.
