EU Debt Crisis Threatens Hong Kong's Trade Financing

by CFO Innovation Asia Staff, 26 December 2011

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Bank Borrowing/Credit Lines Finance and Banking

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balance sheets EU Crisis trade financing

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The trade financing situation in Hong Kong is predicted to become very severe in the next six to nine months as Europe's lenders pull back from the region to boost balance sheets.

The South China Morning Post reports that the deepening crisis could stifle trade financing including letters of credit and syndications for infrastructure and aircraft and vessel leasing, areas that European banks are experienced in.

"Banks have the money but they just dare not lend," Wilson Shea Kai-cheun, president of the Hong Kong Small and Medium Enterprises Association, told the Post. "Factory owners know how difficult it is to obtain a letter of credit."

The Post says economists at Daiwa Capital Markets and Lombard Street Research warn that Hong Kong would be the epicentre of financing casualties when European banks reduce their exposure.

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EU woes threaten trade financing

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