For the Korean market, the agency expects that the coming economic stresses, such as likely rising unemployment rates and possible home price depreciation, may pressure the securitised portfolios backing Korean cross-border securitisation transactions, such as credit card ABS, auto loan ABS and RMBS. Korean cross-border securitisation transactions may therefore experience increases in delinquencies and defaults in 2009. Nonetheless, due to the strengthened risk management approach and proactive asset quality control practices adopted by most Korean originators, Fitch expects that such increases in delinquencies and defaults of the securitised portfolios will be moderate. The asset performance of Korean credit card ABS, auto loan ABS and RMBS transactions thus far has been within the agency's expectations. Fitch expects that the ratings of rated Korean cross-border securitisation transactions will remain stable in 2009.
The Singapore structured finance market is characterised by real estate-related securitisation, including CMBS and residential receivables transactions. Since Q308, the prices and rental indices of the residential and commercial real estate sectors have softened, coupled with the decrease in international visitor arrivals due to the global economic slowdown.
Fitch expects the fundamentals of underlying commercial properties collateralising Singapore CMBS transactions to weaken in 2009. Nevertheless, the agency expects that the ratings of most Singapore CMBS transactions will remain stable in 2009, due to the underlying properties' capabilities to generate healthy cash flows which exceed the agency's stabilised assumptions. Based on Fitch's surveillance analyses, Singapore CMBS transactions, which were mostly issued during 2004-2005, can withstand a 20%-50% decline in net cash flow before a rating downgrade is triggered. Additionally, refinancing risk for a few 2009 maturing Singapore CMBS transactions may emerge. However, Fitch expects that such refinancing risk is limited, as the maturing CMBS transactions are performing well with low current loan-to-value ratios. These are deemed positive credit features by both securitisation and bank loan markets. Fitch expects the ratings of most Singapore CMBS transactions to remain stable.
Singapore residential receivables transactions will be affected by the softening of the residential market. Under the current market conditions, the residential property price decline may exceed the extent of price appreciation accumulated over the past two years. The declining residential property prices may also restrain buyers' capabilities to obtain loans from the bank mortgage market. Fitch expects Singapore residential receivables transactions to experience an increase in buyer defaults in 2009. To address the resale value of the residential unit after a buyer default, Fitch has applied market value decline assumptions of 48%-58% on the transactions. The agency expects the Outlook of Singapore residential receivables transactions to be Stable to Negative.
