Moody’s Predicts Growth in Asia-Pacific Private Credit Markets
The private credit markets in the Asia-Pacific region have seen rapid growth over the past decade and are expected to continue expanding, according to Moody’s Ratings. This growth is driven by niche demand in growing economies. However, banks still dominate lending in the region, keeping private credit markets relatively small.
Current Market Size and Growth
Private credit assets under management (AUM) for Asia-Pacific companies have doubled to approximately USD 120 billion by the end of 2023, compared to four years earlier. Despite this growth, these markets account for only 6-7% of global transactions over the past decade.
India’s Growing Private Credit Market
India’s private credit market is expected to grow strongly, fueled by demand from the real estate, infrastructure, and manufacturing sectors, as well as from unlisted or growing companies. Private credit is seen as a valuable option for middle-market companies and projects like infrastructure development and leveraged buyouts (LBOs).
Investor Interest and Economic Growth
Long-term institutional investors with higher risk appetites are the main investors in Asia-Pacific’s private credit. Large developed economies like Australia, Japan, and Korea have sophisticated financial systems and larger investor pools. In developing economies such as China and India, demand is driven by economic growth and improvements in regulatory and legal systems.
Doubts Revealed
Moody’s -: Moody’s is a company that gives ratings to help people understand how safe or risky it is to lend money to different places, like countries or companies.
Asia-Pacific -: Asia-Pacific is a region that includes many countries in Asia, like India, China, and Japan, and some in the Pacific Ocean, like Australia.
Private Credit Markets -: Private credit markets are places where people or companies can borrow money from private lenders instead of banks.
Assets under management -: Assets under management is the total amount of money that a company or person manages for others, like investments or loans.
Niche demand -: Niche demand means a special or specific need for something that not everyone wants, but some people or companies do.
Higher risk appetites -: Higher risk appetites mean that some investors are willing to take bigger chances with their money in hopes of getting more money back.
Regulatory improvements -: Regulatory improvements are changes in rules or laws that make it easier or safer to do business, like borrowing or lending money.