U.S. President Donald Trump announced that he has reached an agreement with Vietnam to lower the tariffs on exports from this Southeast Asian country to 20% from the previous 46% levy. Similar trade deals could be expected down the line as the July 9 deadline for negotiations looms.
As the market awaits the next tariff announcements, this week’s edition discusses the gains and woes of Asia’s private credit growth and Malaysia’s efforts in its financial centre ambitions.
Private credit faces a deal origination pitfall
The move by Abu Dhabi’s sovereign wealth fund, Mubadala, and global asset manager BlackRock to end their private credit partnership, due to challenges in deal sourcing, has reignited anxieties in the Asian market.
The partnership was meant to focus on deals in China and Indonesia. However, the Chinese market, with persistent political tensions, has seen significant contraction and has become a minefield for foreign investors. This has left the playing field largely confined to local contenders.
Competition in Indonesia is also intense, with its sovereign fund INA strategically poaching BlackRock’s Christopher S Ganis in a clear bid to ramp up its private credit ambitions.
While Australia and India have shown more promise for private credit deals, the path isn’t entirely smooth. As noted by SC Lowy co-founder Soo Cheon Lee, the return profile in Australia often falls short of the desired 15% IRR.
India boasts high growth, coupled with a now more supportive insolvency act, making it a sizzling hot private credit market with dozens of firms raising or having closed funds. Yet, challenges surrounding governance issues persist not just at the enterprise level, but also within financial institutions, leading to curbs on practices such as loan evergreening through Alternative Investment Funds (AIFs).
