Private Credit Markets in Asia Pacific Region to Continue Growing: Moody’s Ratings

Private Credit Markets in Asia-Pacific Region Set to Expand, Says Moody’s Ratings

Private credit markets in the Asia Pacific region have experienced rapid growth over the past decade and are poised to continue expanding, according to a report by Moody’s Ratings. Despite this growth, the dominance of banks in lending means that private credit markets in the region are still relatively small.

The report highlights that the private credit sector in Asia-Pacific will continue to grow, driven by large economies and robust economic growth that increases overall financing needs. Additionally, investors in the region are showing interest in the global private credit market and are expected to allocate their investments into the US and Europe.

Currently, private credit assets under management (AUM) earmarked for lending to Asia-Pacific companies have doubled to about USD 120 billion at the end of 2023 from four years earlier. However, private credit markets in Asia-Pacific still account for just 6-7 per cent of total transactions globally over the past decade.

India’s private credit market is expected to see strong growth, fueled by financing demand from sectors such as real estate, infrastructure, and manufacturing, as well as from companies in growth stages or not yet listed. Moody’s Ratings predicts that private credit will continue to attract demand from middle-market companies and serve as a valuable financing option for projects like infrastructure development and leveraged buyouts.

The report also notes that long-term institutional investors with higher risk appetites are the main investors in private credit in Asia-Pacific. While large developed economies like Australia, Japan, and Korea have more sophisticated financial and legal systems and larger investor pools, demand for private credit in large developing economies like China and India will be driven by economic growth and improvements in regulatory and legal systems.

Overall, Moody’s Ratings expects the private credit market in Asia-Pacific to continue its growth trajectory, providing valuable financing options for companies in the region.