In the year to June 30, 2000 eight Asian issuers with 17 bonds representing a face value of $1.8 billion defaulted, according to a survey conducted by the bank. "Defaults are way down," vice president of Fixed Income Credit Research at JP Morgan Merrit Maddux said. For the three year period since the onset of the Asian crisis in July 1997, his survey has found 64 issuers with bonds worth a total $14.2 billion defaulted in Asia.

Around 48 per cent of Asia bond defaults occurred in the first year of the crisis, 39 per cent in the second year and 13 per cent in the latest survey period, Maddux said. "Korea was the largest defaulter in the past year because of Daewoo," he said. "Thailand and Indonesia had no corporate bond defaults last year. However, for the entire survey (from July 1997) Indonesia and Thailand are the largest defaulters," he said.

JP Morgan's survey covers all Asian issuers of foreign currency debt in the eurobond, Yankee bond and convertible bond markets. It focuses on bond defaults rather than loans or domestic debt instruments and includes floating rate notes.

As a result of the latest finding Maddux concludes; "In our view the market for Asian bonds has broadly returned to post crisis normalcy."

An interesting trend noted by Maddux in the survey results was that by far the largest category of defaulters is government related or owned finance companies, investment holding companies or commercial enterprises.

"The most severe defaults in our survey are credits where the market perception was of government support, but when the crisis came the government support was not forthcoming," Maddux said. "Our survey shows governments will support main banks and monopolies because, if they are not supported, it will have systemic consequences."

"But otherwise governments are just as likely as any other stakeholder in a corporate situation to act in their own interests. They are not going to be altruistic just because they are a government," Maddux said. JP Morgan puts in the government-linked category debts issued by China's international trust and investment corps (ITICs). Daewoo debt in Korea is also included because, JP Morgan argues, the market perception was that the government would support it.

Maddux said going forward Asia's credit market was likely to continue to be dominated by bank lending, but debt issuance would begin to pick up in the second-half of this year and in 2001. He expects major issuers to come from Asian banks seeking recapitalisation though subordinated debt deals, Asian telecommunications companies and corporate borrowers looking to refinance outstanding debt.

-- (Reuters)