Brazil asset-backed securities market falters after new rules – IFR

By Reuters Staff
March 1, 2010

SAO PAULO, March 1 (Reuters) – Growth prospects for Brazil’s asset-backed securities market have diminished significantly since regulators last month banned the use of retail investors’ money to buy such instruments, capital markets information service International Financing Review said on Monday.

In Brazil, specialized investors for years bought the securities probably with the help of retail money, which was parked in their portfolios alongside other types of funds, IFR said.

But after the securities regulator CVM changed the rules, new issues are expected to virtually ground to a halt growing only to about 550 million reais ($305 million) by year-end, IFR said.

Brazil’s ABS market, which has around $5 billion in outstanding securities, was expected to grow sharply this year despite an imminent increase in interest rates, IFR said.

Already about 500 million reais ($280 million) of the securities had been sold, according to CVM data.

There are about $70 million worth of deals waiting for approval by CVM.

Mid-sized lenders that use the market as a way of freeing up cash to boost lending are likely to lose with the ban as they need quick ABS turnover to lower risk, IFR said.

(Reporting by Guillermo Parra-Bernal; Editing by Richard Chang) ((guillermo.parra@thomsonreuters.com; Tel: +55-11-5644-7714; Reuters Messaging: guillermo.parra.reuters.com@reuters.net))

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