By Bloomberg News May 27 (Bloomberg) -- Asia-Pacific companies are borrowing less for expansion on concern Europe’s debt crisis may cut export demand, hampering banks’ efforts to revive loan markets shuttered in the global credit freeze. Syndicated lending in Singapore plunged 72 percent to $1.8 billion this year from $6.5 billion in the same period of 2009, according to data compiled by Bloomberg. It slumped 17 percent in Australia and New Zealand to the lowest since 2004, and 18 percent in Indonesia to the least since 2006, the data show. “The low levels of deal volumes are because of a hesitation on the part of the corporates to take on fresh leverage,” Atul Sodhi, head of loan syndication for Credit Agricole CIB in the region, said in a telephone interview before the Asia-Pacific Loan Market Association’s 12th annual conference in Beijing today. “Lack of demand is the issue here rather than supply” of credit, he said. While Asia has led a recovery from the deepest global recession since World War II, concern Europe’s debt woes will derail growth has jolted investors and pushed the MSCI Asia Pacific Index down 8.9 percent this year. “Downside risks have intensified,” Singapore’s trade ministry said May 20 after New York University professor Nouriel Roubini said fiscal problems may push Europe into a “double-dip” recession. “Most Asian corporates are exporting to Europe or the U.S. and demand conditions in these markets are not necessarily very buoyant, so the rationale to invest in big projects or developments is not so strong,” Sodhi said. Asian Exports About 60 percent of exports by companies in developing Asian nations end up in the U.S., Europe or Japan, according to the Asian Development Bank. The euro has lost 15 percent this year, making Asian goods more expensive for buyers in the 16 European nations that use the common currency. Australian business investment unexpectedly fell in the three months through March as manufacturing companies spent less on equipment and machinery, the Bureau of Statistics said in Sydney today. Capital spending dropped 0.2 percent from the previous quarter, when it climbed a revised 6.1 percent. The three-month London interbank offered rate for dollars, a benchmark for borrowing costs, fell to a record 0.2488 percent on Dec. 21 amid signs the world was emerging from recession. It advanced to 0.5378 percent yesterday, the highest since July 6, on concern about Europe and rising tensions between North Korea and South Korea. ‘Shuddering Halt’ “There’s a lot of liquidity in the Asian markets and that means pricing could come down,” Phil Lipton, HSBC Holdings Plc’s head of syndicated finance for Asia-Pacific debt capital markets, said at an APLMA discussion panel yesterday. “However, I think we could potentially reach a shuddering halt very soon if banks’ cost of borrowing continues to go up.” Should Europe’s debt crisis continue, the amount banks have to charge companies “will start to tick up sooner than we think,” Didier Leblanc, head of Asia-Pacific loan syndication at BNP Paribas SA, said at the panel. Syndicated lending in China has fallen 76 percent to $6.2 billion this year, Bloomberg data show, as the government stepped up efforts to curb credit expansion after a record surge in property prices. Hong Kong Lending more than tripled to $20.8 billion in Taiwan, helped by Taiwan High Speed Rail Corp.’s $12 billion state- supported loan in the local currency. It jumped more than six- fold in Hong Kong to $12.2 billion, bucking the regional trend, amid record borrowing by Chinese developers circumventing the crackdown at home and betting a revaluation of the yuan will cut repayment costs, according to Wilson Wan, head of leveraged and structured finance for Bank of China International. “Chinese banks have a limited foreign currency position in China so everyone is trying to borrow foreign currency because when they pay it back the yuan would have appreciated,” Wan said in a phone interview from Hong Kong. China has kept the yuan pegged to the U.S. dollar for 22 months to help exporters weather the global financial crisis, after allowing its currency to rise 21 percent in the previous three years. At the start of this month forward contracts were indicating investors were factoring in a 1.2 percent gain in the yuan over a year. Some companies “possibly believe that pricing is going to fall so they can wait a bit longer before raising funds,” HSBC’s Lipton said in a phone interview before the conference. “That’s quite a risky strategy. As we’ve seen with the Greece fallout, things can turn.” --Henry Sanderson and Shelley Smith. Editors: Will McSheehy, Ed Johnson To contact Bloomberg News staff on this story: Shelley Smith in Beijing via the Hong Kong newsroom at +852- 2977-6623 or ssmith118@bloomberg.net; Henry Sanderson in Beijing at +86-10-6649-7548 or hsanderson@bloomberg.net.

Source