labels: Stock markets - world, Standard & Poor's
Outlook sound for Asia's corporate sectors, but defaults may rise: S&P news
25 March 2008

Mumbai: Increasingly challenging operating conditions have increased the risk of corporate credit defaults in Asia, says rating agency Standard & Poor's  in an article Asia's Corporate Sectors Will Roll With The Punches In 2008, released today. But the overall outlook for Asia's industries remains sound, reflecting their growing maturity.

The article says domestic challenges, such as rising inflation, will outweigh external issues as having the biggest impact on credit health. Another recent article, titled "2007 Annual Asia Corporate Default Study And Rating Transitions", also notes that default rates are currently at an historical low.

"While strong domestic consumption and intra-regional trade should help most sectors absorb external shocks, country-specific issues could undermine the credit quality of some companies," says Standard & Poor's credit analyst Ryan Tsang. "Those most at risk of default will have weak risk profiles, aggressive expansion plans, and sizable maturing debt that requires refinancing in 2008."

The fallout from the global credit crunch, a weakening US dollar, and a slowdown in the US economy will particularly affect ASEAN companies. Exporters will be hardest hit.

"The ASEAN companies that are most likely to struggle in this tough environment have borrowed too heavily and will feel the strain when interest costs rise and refinancing pressure increases," says Standard & Poor's credit analyst Anshukant Taneja.

In Greater China, reduced liquidity, slower trade, and slower financing activities remain key risks.

The outlook article outlines the major domestic challenges for individual sectors, such as rising labour costs in China, and highlights the changing credit profiles of rated companies.


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Outlook sound for Asia's corporate sectors, but defaults may rise: S&P