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Standard & Poor''s presents key risks and outlook for Asia-Pacific sovereigns news
10 October 2007
Asia-Pacific sovereigns should continue to show resilience in the face of the latest global economic challenges, says Standard & Poor''s Ratings Services in a new report, Steady Outlook For Asia-Pacific Sovereign Ratings Amid Global Instability, released today.

In addition, Standard & Poor''s today published its annual Asia-Pacific Sovereign Report Card, which offers a detailed overview of the factors that will shape the credit quality of individual Asia-Pacific sovereigns in 2008 and beyond.

"The Asia-Pacific will, like the rest of the globe, feel the pressure from the current disturbances on global equity and credit markets. In addition, growth forecasts for 2008 increasingly highlight the possibility of a more marked slowdown in the US and Eurozone economies, which could weaken export growth in the Asia-Pacific," said Standard & Poor''s credit analyst Elena Okorotchenko. "Further increases in oil prices
due to potential supply shocks could represent another significant challenge to Asia-Pacific sovereigns."

Nevertheless, the fundamentals suggest that Asia-Pacific sovereigns are well placed to absorb these potential risks. However, in the event that such risks materialize and become more severe or protracted, much will depend on the ability of Asia-Pacific sovereigns to provide adequate policy responses and avoid policy mistakes. This ability to respond appropriately could be tested if certain domestic or regional political concerns increase.

Over the past few years, many countries in the Asia-Pacific region have demonstrated better fiscal performances, improved the quality of their banking systems, and strengthened their external positions. These efforts have placed the region on a reasonably steady footing for 2007-2008, which is evident in the predominance of stable and positive outlooks on the credit ratings of Asia-Pacific sovereigns. Of the rated 22 sovereigns, 15 are currently on stable outlooks, five are on positive outlooks, and only two sovereigns, Taiwan and Fiji, are on negative outlooks.

"In the medium term, greater efforts in structural and fiscal reforms, further deepening of domestic capital / debt markets, increased investment in infrastructure, and improvements in public sector transparency and predictability could see positive ratings actions on many Asia-Pacific sovereigns," said Okorotchenko. "Conversely, a stalling or reversal in the reform process or significant policy missteps could slow down the positive credit momentum and even put downward pressure on the ratings on emerging Asia-Pacific sovereigns."
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Standard & Poor''s presents key risks and outlook for Asia-Pacific sovereigns