Gordon Crosbie-Walsh Explains Private Credit Market Growth Among Ultra-Rich in Asia-Pacific
Private Credit Market Surge Amid Wealth Constraints
Amid liquidity challenges, affluent individuals in Hong Kong and mainland China are increasingly turning to private lenders, utilizing stocks as collateral for borrowing.
With public capital markets not fully recovered, traditional banks remain cautious about lending. The ongoing woes in the property market leave equities as the best collateral option for many ultra-high-net-worth individuals (UHNWIs) seeking to generate liquidity.
Insights from Gordon Crosbie-Walsh
According to Gordon Crosbie-Walsh, Asia CEO at Equities First Holdings, "The liquidity constraints felt by UHNWIs are very real." Real estate developers, among the hardest-hit clients, have struggled to secure financing from investment banks and private banks.
- Private credit market in Asia-Pacific grew to at least US$124 billion in 2023.
- Opportunity for equity-backed financing is significant for liquidity-constrained Chinese borrowers.
- Growing demands for financing options with lower rates expected to promote stock performance.
Market Trends and Future Outlook
Equities First extends loans based on pledged shares, typically Hong Kong-listed stocks, to Chinese borrowers at fixed rates of approximately 3.5 to 4.0 percent.
China accounts for over 65 percent of the firm’s Asia-Pacific loan deployment. This segment grew almost 2.8 times in the past four years, fueled by increasing interest in private credit.
HSBC, a leading private bank, has also observed a resurgence of lending against stocks among wealthy clients. Jyrki Rauhio from HSBC points out that recent changes in US Federal Reserve policy may encourage clients to use their stock as collateral again.
- Market improvement leads to renewed client comfort in using securities as collateral for funding projects.
- Interest rate protection structures are becoming more popular with clients looking to hedge exposure.
- Private banks urge careful consideration of financing needs amid fluctuating markets.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.