US dollar to lose lead in Asia project loans-Stanchart

SINGAPORE: Project financing in Asia priced in regional currencies is expected to double this year as banks veer away from assets backed by the U.S. dollar, the head of regional project finance for Standard Chartered Bank said on Thursday. Conor McCoole told Reuters in an interview that project finance was growing strongly in Asia -- lending hit a record $44.8 billion last year and in the first quarter of 2008 grew six fold over a year earlier -- despite the global credit crisis.

He said he expected Singapore and Philippine power projects to dominate the market this year and for local banks to benefit longer term as regional currencies are used more in project financing. But one casualty of the credit crisis in Asia's project finance market was lending in the U.S. dollar, another indication of the stresses on the world's reserve currency. Most Asian currencies have rallied against the dollar this year, some to decade highs.

"There is no question that there are lot of Asian banks that are concerned about taking on U.S. dollar assets and their ability to fund those assets. We are talking about very long-term loan assets," he said. McCoole said he expects 40 percent of the region's project financing this year to be priced in local currencies, compared with an estimated 20 percent last year. He said over the long-term -- 5 to 10 years -- he expected 80 percent of project finance in Asia to be priced in local currencies, putting local banks in an advantageous position against foreign banks that rely on cross-border deals.