Private Credit Firms Witness Increased Growth in Asia as Banks Withdraw

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Key private credit firms are anticipating a rise in lending across the Asia-Pacific region in 2024, with a focus on higher-quality borrowers rather than distressed cases. A Bloomberg survey, which included major players like Apollo Global Management Inc. and Blackstone Inc., revealed expectations of a market growth exceeding 10% this year. This shift towards solid companies with healthy cash flows comes as banks, traditionally major lenders in the region, are scaling back.

The education, healthcare, and consumption-related sectors are identified as the most promising for deals. The $1.7 trillion global private credit market, though a small fraction in the Asia-Pacific, has witnessed rapid growth compared to other regions. Notably, Goldman Sachs Group Inc. secured $1 billion from Abu Dhabi sovereign wealth fund Mubadala Investment Co. to pursue private credit deals in Asia.

Private credit is becoming a significant financing source in Asia, following trends seen in the US and Europe. Anticipated growth in mergers and acquisitions is expected to drive demand for private credit, with demographic shifts, such as the burgeoning middle class in India and Vietnam, and an aging population boosting sectors like healthcare.

Consumer businesses, including schools and technology, are expected to benefit from increased household spending as economies recover from the pandemic. The energy transition sector is also projected to see increased activity. Private credit assets under management in Australia reached a record high in 2023, with expectations of continued growth, particularly in real estate opportunities.

However, respondents remain cautious about China due to its economic slowdown and geopolitical tensions. Markets dependent on trade and exports are particularly sensitive to global macro developments. Despite challenges, private credit firms remain optimistic about opportunities in the Asia-Pacific region in 2024.