Should infrastructure financing in Asia be local in currency? This is one of the many questions raised at the recent Asia Energy & Infrastructure Finance Leaders Dialogue led by The Asset in cooperation with Fitch Ratings, Standard & Poor’s and Sumitomo Mitsui Banking Corp.
Rajeev Kannan, director and head of investment banking Asia at Sumitomo Mitsui, believes Asia financing should be a combination of local and G3 currency. The issue is liquidity.
Kannan says: “These (Asian) countries do not have enough local liquidity or enough savings to support local currency financing. It has to be a combination of local currency and G3 currency financing because the liquidity in G3 currency is significant.”
And while the local currency develops, there is also the issue of currency risks, cites Kannan. He notes that infrastructure financing in Asia can eventually be local in currency, but unlikely to be in the near future.
“I always believe that you cannot move from pure international currency financing automatically to local currency financing market. It has to be a combination. That can be a local currency financing, but it’s not going to happen overnight.”
