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CNBC
39 minutes ago
- CNBC
Private credit giants turn to Asia as funding gap widens in region
The private credit industry is ramping up its focus on Asia-Pacific, drawn by a combination of evolving capital markets and expanding funding gaps as traditional bank lending pulls back. The region is also fast emerging as a focal point for private credit investors seeking fresh opportunities outside of the more saturated markets of the U.S. and Europe, industry experts told CNBC. "Asia is undeniably emerging as a significant private credit growth hotspot," said Nicholas Cheng, head of the private markets group at Standard Chartered Global Private Bank. "The growing funding gap, rapid economic growth, increased sophistication of borrowers, and evolving regulations make it fertile ground." Data supports the rapid growth. Private credit assets under management (AUM) in Asia rose from virtually zero in 2000 to $62.3 billion in the first quarter of 2024, the latest data provided by Pitchbook showed. That expansion has accelerated particularly in recent years, with AUM more than doubling from $34.3 billion in 2017 to over $62 billion in 2024. Global players have also expanded their presence across Asia's credit markets. Apollo Global Management was recently selected to manage Singapore's $1 billion private credit fund, which is aimed at supporting high-growth local businesses. Hillhouse Investment is reportedly looking into deploying between $1 billion and $2 billion each year in Japan, as well as aiming to roughly double its headcount in the country. Evolving regulatory landscapes and global investors' search for higher yields are pushing more capital into Asia's still-nascent but fast-growing private credit markets. While banks dominate credit provision in Asia far more than in Western markets — accounting for about 79% of lending compared with 54% in Europe and just 33% in the U.S., according to investment firm KKR — that dynamic is shifting. Private credit is stepping in to fill a widening funding gap, particularly for mid-market companies. "As these countries continue to develop, so too does the number of mid-sized companies that may have difficulties accessing traditional bank financing, opening the door for private credit to service this market," said Kyle Walters, private equity analyst at PitchBook. On top of that, he foresees that as Western markets mature, more capital will shift to Asia. "As mature regions like the U.S. potentially start to cap out, you'll see more PE and private credit managers looking at Asia as an opportunity." The growth of private credit in Asia has accelerated significantly in recent years, especially after the region's high-yield public bond markets faltered amid a wave of defaults and investor caution, JPMorgan said. "Over the last three years, the public high-yield market almost closed," noted Serene Chen, a managing director at JPMorgan. "That accelerated the development of private credit in Asia, as companies still needed refinancing options." Private credit funds seized the opportunity to step in with bespoke, complex financing solutions, often targeting companies locked out of traditional funding channels. "Asia's driving over 50% of world GDP growth, but public debt markets remain underdeveloped," Chen added, highlighting a structural gap that private credit is increasingly filling. Interest spans geographies and sectors. India and Southeast Asia are drawing significant capital, thanks to their strong economic growth and burgeoning middle classes, private credit veterans said. Singapore remains a key financial hub, while Indonesia and Vietnam are becoming magnets for capital, said Standard Chartered's Cheng. In mature economies such as Japan and South Korea, banking systems remain dominant, but opportunities can be found in mid-market segments, according to analysts. Japan is known for its robust banking system, so it may not have the upside of other countries, PitchBook's Walters noted. "Still, it does present a country with a stable economy and high quality of credit, two attractive features to lenders," he said. South Korea, likewise, has a robust banking system, but it has the ability to capture a share of middle market activity, as seen in the U.S. and Europe, Walters added. China, despite economic headwinds, still presents pockets of opportunity, particularly as banks there deleverage. KKR's head of Asia credit and markets, Diane Raposio, told CNBC that the private equity company is taking a "highly disciplined approach" in China, focusing on companies with robust cash flows and durable balance sheets. Australia, meanwhile, appeals to more sophisticated strategies given its mature legal framework and strong corporate activity, Standard Chartered said. Sector-wise, infrastructure, technology and renewable energy are major themes. "Infrastructure has been a very big sector because in Asia, especially in emerging market Asia, you still need to build a lot of renewable energy, you still need to build toll roads and you need to build data centers," said Eddie Ong, deputy CIO and head of private investments at SeaTown Holdings International, who added that SeaTown is targeting opportunities in India, Australia and Hong Kong. Similarly, JPMorgan's Chen pointed out the huge demand for renewable energy, toll roads, and data centers in emerging markets. But despite the optimism, Asia's patchwork of jurisdictions presents risks for private credit investors — namely, currency fluctuations, legal enforcement issues, regulatory uncertainty, and lack of transparency in some markets — all of which can complicate deals and undermine returns. "Legal and regulatory environments vary significantly, making loan enforcement and collateral perfection challenging," Cheng said. "Transparency and standardized reporting also lag more developed markets." PitchBook's Walters said lenders and investors will need to create buffers for currency risks, with volatile foreign exchange markets adding another layer of complexity. Those are often managed through hedging strategies that add costs, he said. Nevertheless, though the region's credit markets are less mature and more fragmented than those in the U.S. or Europe, KKR's Raposia sees a "significant trajectory" ahead for the private credit industry in Asia. Although the region accounts for nearly 60% of global gross domestic product growth, less than 5% of local financial assets are allocated to credit, compared with nearly 30% in Europe, she said. "This suggests a private credit market with room to grow by an estimated $700 billion," she added. Standard Chartered's Cheng similarly expects the market to continue growing at a "sustained double-digit percentage rate annually" for the foreseeable future, driven by the persistent funding gaps and growing acceptance of private credit as a viable financing tool.
CNBC
39 minutes ago
- CNBC
World's largest olive oil producer warns U.S. consumers of a double whammy from Trump tariffs
Spain's Deoleo, the world's largest olive oil producer, says U.S. President Donald Trump's threat to impose 30% tariffs on imports from the European Union could translate into higher prices for U.S. consumers — as well as limited access to a superfood staple. Trump has threatened to raise tariffs on the 27-member bloc from Aug. 1, in what would mark a steep jump from the current 10% duty. The EU has long been scrambling to reach a trade deal with the U.S. and is considering its options ahead of Trump's deadline, including the prospect of countermeasures. Huge uncertainty persists over whether the U.S. and EU can strike a deal over the coming days, although a blockbuster framework agreement between the U.S. and Japan has raised hopes of a breakthrough. Deoleo, the maker of household olive oil brands such as Bertolli and Carbonell, told CNBC that the Trump administration's trade measures could have an impact on American consumers, particularly given limited U.S. production. "It is worth noting that approximately 95% of the olive oil consumed in the U.S. is imported, so such policies will affect end users," Deoleo CEO Cristóbal Valdés told CNBC by email. The Spanish company said the U.S. accounts for more than a quarter of its total revenue, making it a strategically important market. Around 40,000 acres (16,187 hectares) of olives are planted exclusively in the U.S. for olive oil production, according to the American Olive Oil Producers Association. By comparison, the EU is known to be the leading producer, consumer and exporter of olive oil, with roughly 4 million hectares (9.88 million acres) dedicated to the cultivation of olive trees across the region. Most of the world's supply of olive oil comes from the Mediterranean, with southern European countries such as Spain, Italy and Greece among the world's leading producers of the precious commodity. Spain, in particular, is the biggest olive oil producer in the EU and a global reference for prices. As part of its preparation for a higher tariffs rate, Deoleo's Valdés said the company intends to ramp up its communication, marketing and consumer engagement efforts to ensure olive oil remains an everyday staple. "Beyond institutional dialogue, we are strengthening our value proposition in the U.S. through consumer awareness campaigns about the benefits of olive oil and a renewed commitment to our brands—especially Bertolli, which today represents trust and consistency for American consumers," Valdés said. Deoleo's chief executive also said the olive oil producer would continue to keep all strategic options open, while working on logistics and supply chain improvements to respond to different market scenarios. "However, beyond tactical decisions, our main priority is to protect American consumers' access to a food product that is essential to their health. Access to olive oil should not be penalized — it should be promoted," Valdés said. As U.S. tariffs on EU goods first came into effect in early April, analysts at commodity data firm Expana warned that a reduction in U.S. olive oil imports could have "serious repercussions" for the global market. They cited market players as saying that such a shift could create a supply glut in the EU, leading to further downward price pressure and intensifying competition among producers. It's not just olive oil exporters that have been rattled by Trump's latest tariff threats, however. Irish whiskey firms, Italian cheesemakers and French wine producers are among those who have sounded the alarm over the potential impact.
CNBC
39 minutes ago
- CNBC
China plans subsidy vouchers for seniors to ease strain on its aging population, drive consumption
China is planning to offer subsidy coupons to seniors in a rare use of direct fiscal support as Beijing seeks to ease the financial strain on its aging population and drive consumption of elderly-care services. The allowances will be paid monthly in the form of electronic coupons to cover part of the costs for seniors' care services, according to a joint statement issued by the ministry of civil affairs and ministry of finance on Wednesday. Chinese policymakers have avoided direct cash handouts similar to what the U.S. and Hong Kong offered during the pandemic to stimulate spending, even as they step up efforts to support employment and improve social welfare. "The financial burden that elderly care generates for Chinse households ... is one of major current constraints to reducing precautionary savings and boosting domestic consumption," said Alfredo Montufar-Helu, a Beijing-based advisor to multinational enterprises. Seniors will be assessed for their physical disability, and only those evaluated as "moderately, severely or completely disabled" will be allowed to claim such subsidies, according to the official statement. The allowances are currently set between 500 yuan and 800 yuan a month and can be used to pay for a portion of the costs for certain senior-care services, such as meal and bathing assistance, rehabilitation and day care. Details of the plan may be further "optimized" as authorities will run a pilot in select cities this month before a nationwide roll-out later this year. The scheme will last for 12 months. The measures could incentivize the adoption of such senior care services and ease the "hefty elderly care burden" for family members, said Tianchen Xu, senior economist at Economist Intelligence Unit. Echoing that view, Lynn Song, chief economist for Greater China at ING, said that while "strengthening of the social safety net has been one of the main goals in order to better unlock consumption, these measures can be interpreted as steps in this direction." As China's population ages and middle-class consumers facing job uncertainty scale back spending, the so-called silver economy — a sector that provides goods and services for people over 50 — has been on the rise, with more businesses targeting seniors who have accumulated sufficient retirement funds. "It's crucial for the government to keep pushing forward with reforms and strategies that tackle the deeper structural [supply-demand] imbalances," Montufar-Helu said. The fiscal aid will be primarily funded by the central government, with local authorities contributing a smaller share, according to the statement Wednesday. "Elder care is a key component of the country's broader services consumption ... the initiative is designed to foster new growth drivers and better align economic development with social welfare," the statement reads, translated by CNBC. Economists have ramped up calls for Beijing to prioritize policies aimed at strengthening the country's social safety net to tackle the aging population, high youth jobless rate and tepid domestic consumption. "Mounting demographic and economic pressures are forcing Beijing to highlight the social policy agenda in the upcoming 15th five-year plan," Eurasia Group said in a note Thursday. "Bolstering the social safety net, especially through changes to pensions and healthcare, is high on the agenda to adapt to a rapidly graying society," Eurasia Group said in a note Thursday. About 22% of China's population was aged 60 or older at the end of 2024, the statement said, up from 18.7% in 2020. The population aged 65 years and above in China reached 216.8 million in 2023, accounting for 15% of the total population.
