European banks re-leverage in Asia

Asia’s total exposure grew by 4.7% after a 10% decline in 4Q11 with Singapore  recording the largest increase.

After six months of withdrawing of liquidity from Asia through 2H11, European banks’ (ex-UK) exposures grew again in 1Q12, said Barclays Capital.

Total exposure increased by 4.7% q/q or US$42bn (but was down 10% or US$105bn y/y), following a US$100bn (10%q/q) decline in 4Q11.

Taiwan and Indonesia have seen the largest percentage declines while Singapore and Hong Kong recorded the largest increases.

Here's more from Barclays Capital:

Amongst the other foreign lenders, we have seen an increasing level of participation from the Australian banks, ongoing strong growth by the Japanese lenders, while a pick-up in 1Q12 exposure for UK banks suggests a recovery or acceleration in growth at HSBC and Standard Chartered.

 Major shifts in European bank exposures appear to have subsided, and with total exposures now only 4% of system credit we continue to see minimal risk of disruption to the local markets.

We believe the increase in exposure in 1Q12 was helped by improved sentiment in Europe around the time of LTRO, and QE3 expectations. However, as we are seeing ongoing issues in the Euro-area, we expect any return to Asia by European banks to have a minimal impact on increasingly tight liquidity
conditions in the Asia region.