Asia’s $640 billion bad-loan pile lures investors, Deloitte says

Hong Kong: A growing pile of bad debt in Asia is luring more global investors.

That’s the view of consulting firm Deloitte LLP, which estimates that non-performing loans held by banks across Asia jumped 23 per cent to $640 billion, amid a slowdown in the global economy and simmering US-China trade tensions.

China continues to dominate the region’s soured loans, with a total of $295 billion held by Asian banks, while India is the second largest at about $160 billion, according to Deloitte in a report. China’s non-performing debt has lured global funds from Oaktree Capital Group LLC to Bain Capital Credit, while India needs foreign capital to clean up the world’s worst bad-loan pile.

The scale of China’s non-performing loan market is “on par with even the busiest of European markets,” with Deloitte estimating that 380 billion yuan ($53 billion) of soured debt traded in the secondary market in 2018. Foreign investors were “under-represented,” buying only 4 per cent of these NPL portfolios by value, it said.

Overseas investor interest in China has risen over the past couple of years, “with several high-profile buyers entering the market,” according to Deloitte. The growth in China’s non-performing loan market has “shown no signs of cooling during 2019,” the consulting firm said.

In India, Deloitte sees increasing interest from investors, as the country’s regulatory framework forces banks to be more proactive in tackling their soured assets.