Fitch Ratings has claimed the majority of the collateral performance backing non-Japan Asia structured finance (SF) transactions is expected to be stable in 2010, as non-Japan Asian economies have continued to recover and outperformed most of the major advanced economies in the macroeconomic terms.

In its latest special report entitled, '2010 Non-Japan Asia Structured Finance Outlook', it found that although affected by the economic downturn, non-Japan Asia SF transactions performed relatively well compared to their US and European counterparts since the onset of the economic downturn in 2008.

Henry Hung, associate director in Fitch's non-Japan Asia SF team, said: "Given that the economies in the region are projected to continue to improve with relatively low and stable unemployment expectations for 2010, SF transactions, particularly in the consumer finance sector, are expected to benefit from the economic recovery; hence the expectation of stable rating performance in 2010."

Fitch currently monitors transactions with collateral in Korea, Singapore, Hong Kong, Taiwan and Thailand. The Report found that among these transactions, Korean transactions, which include RMBS, credit card ABS and auto loan ABS, have been the least affected during the economic downturn. Key transaction performance indicators, such as delinquency and default ratios, deteriorated to a limited extent within the agency's base case assumptions. And with the robust economic outlook in 2010, these Korean transactions are expected to continue their stable rating performance.

It found that Singapore properties which back Singapore Commercial Mortgage-Backed Securities (CMBS) transactions were still experiencing downward pressure on cash flow because corporate tenants were generally not "in expansion mode", and market supply is expected to increase in 2010.

However, Fitch expects Singapore CMBS transactions to have stable rating performance as it said these transactions can withstand a 20%-50% net cash flow decline before a rating downgrade might be considered. Two Singapore CMBS transactions, series 018 of Silver Maple and Orion Prime, are due for refinancing in 2010; and the agency expects the refinancing risk for the transactions to be under control given the easing of credit market, the stable collateral performance and the REIT managers' capabilities to arrange financing ahead the transactions' expected maturity dates.