Slowing Asia-Pacific economies continue to weigh on outlook for credit quality

Dhaka,  Sat,  23 September 2017
Published : 15 Oct 2016, 10:22:24

Slowing Asia-Pacific economies continue to weigh on outlook for credit quality

MELBOURNE --Slowing economies across

Asia-Pacific continue to weigh on S&P Global Ratings' outlook for credit

quality across the region. Despite some easing in the rate of slowdown, the

lag effect from earlier periods of deceleration has translated into a

worsening in the net outlook bias for the pool of Asia-Pacific issuers that we

rate. That's according to "Asia-Pacific Sector Outlook 4Q 2016: Net Negative

Outlook Bias Rises To 13pc From 11 pc."

"In particular, the continued slowdown in China and recent revisions to our

outlooks on several sovereigns have contributed to the weakening," said Terry

Chan, a credit analyst at S&P Global Ratings. "Over the three months to August

2016, the net ratings outlook bias has weakened to -13 per cent from -11 per cent in May 2016,

indicating a rising likelihood of rating transitions. The average rating of

the Asia-Pacific pool remains 'BBB+'."

Still-low commodity prices have kept a net half (-44%) of the ratings outlooks

on metals and mining issuers and a net third (-36%) of oil and gas issuers on

negative. The property oversupply in China, despite rising prices, is

contributing to a net quarter (-26%) of outlooks on real estate developer

issuers being negative. In contrast, the conservative profiles of REITs have

kept the net negative outlook to just -7%. A net 15% of building materials

issuers are on negative, although admittedly this has more to do with

company-specific challenges.

The general economic slowdown has caused businesses to be more prudent with

capital expenditure. This has driven the net outlook on capital goods to -19%

and chemicals to -18%, although company-specific difficulties are the primary

reason for the latter. Overcapacity in shipping, as evidenced by the

bankruptcy of Korea's Hanjin Shipping, has pushed the net outlook for

transportation-cyclical to -23% with some flow-on effect for

transportation-infrastructure (-7%). The latter is held up by airports, which

are enjoying strong passenger growth, and by road and rail, which is facing

relatively stable business conditions, said a statement.



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