Expect ‘stagnant’ Chinese structure finance market in 2024: S&P

Issuance momentum of dominant segments will reportedly remain slow.

China’s structured finance market is expected to be stagnant during 2024, according to a report by S&P Global Ratings.

The ratings agency expects overall issuance to stay flat in the next 12 months, after declining 7% in 2023.

Momentum will reportedly remain constrained in the dominant market segments of residential mortgage-backed securities (RMBS) and auto-loan asset-backed securities (ABS). This mostly reflects the fundamentals of the respective sectors, such as developments in the property market and vehicle sales, S&P said.

“We expect issuance in China's structured finance market to stay flat in 2024, with the issuance momentum of dominant segments to slow,” the ratings agency wrote in the report.

Issuance prospects will depend on the fundamentals of the respective sectors amidst a slow recovery of China's economy, it added.

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However, collateral performances is expected to hold up across auto ABS, RMBS, and consumer finance ABS.

“Important sector trends to watch are the resumption timing of RMBS issuance, the issuance trajectory of consumer ABS and green auto ABS, as well as the increasing issuance of micro and small enterprise loan securitization, nonperforming loan ABS, and asset-backed plans managed by insurance asset management companies,” S&P added.