Private credit markets in the Asia-Pacific region have experienced rapid growth over the past decade and are expected to continue expanding, according to Moody’s Ratings. The rating agency attributes this growth to increasing economic activity and financing needs in the region, although it notes that the traditional banking sector remains dominant in lending.
Continued Expansion Expected
Moody’s Ratings asserted that the private credit sector in Asia-Pacific will continue to expand, particularly in large economies where robust economic growth is boosting overall financing needs. The agency highlighted that Asia-Pacific investors are increasingly looking beyond their borders, allocating investments into the global private credit market, specifically targeting the U.S. and Europe.
Current Market Size and Growth
As of the end of 2023, private credit assets under management (AUM) dedicated to lending to Asia-Pacific companies had roughly doubled to about USD 120 billion from four years earlier. Despite this substantial increase, the private credit markets still account for only 6-7% of total global transactions over the past decade.India’s private credit market is poised for strong growth, driven by financing demand from the real estate, infrastructure, and manufacturing sectors. Additionally, companies that are not yet listed or are in their growth stages are increasingly turning to private credit for funding. “Private credit will continue to draw demand from middle-market companies, helping to fill their funding gaps. It can also be a valuable financing option for projects such as infrastructure development and leveraged buyouts (LBOs),” Moody’s Ratings noted.Moody’s emphasized that long-term institutional investors with higher risk appetites are the main investors in private credit in Asia-Pacific. Larger developed economies, such as Australia, Japan, and Korea, have more sophisticated financial and legal systems, as well as larger investor pools, which contribute to their more advanced private credit markets. In contrast, in developing economies like China and India, the demand for private credit is primarily driven by economic growth and ongoing improvements in regulatory and legal systems.
Overall, while private credit markets in Asia-Pacific remain relatively small compared to traditional lending, they are positioned for significant growth, driven by various sectors and investor interest.
(With inputs from ANI)
