labels: Standard & Poor's
Asia avoids economic downturn; risks loom: S&P news
30 July 2008

To date, Asia has largely avoided the doom and gloom enveloping its counterparts in the US and, increasingly, Europe, said Standard & Poor's an article published today.

Titled "Asia Credit Comment: Can It Stay Above The Fray?", the article says that macroeconomic fundamentals in the region still appear sound, and although pressure is undoubtedly increasing in light of global frailties, there appear to be no major threats to macroeconomic stability.

Exports continue to be resilient, in part benefiting from reduced dependence on the US compared with a decade ago. In addition, regional domestic demand is accelerating
(notably in large markets such as China and India), and the region's net creditor profile and cumulative foreign reserve position are peerless.

"However, the outlook for regional credit markets is not cloudless," said Diane Vazza, head of Standard & Poor's global fixed income research group. "It would be inappropriate to gloss over the emerging risks."

Even though Asia will continue to benefit from higher economic growth rates vis-à-vis its global counterparts, regional credit markets face headwinds from domestic and external factors. These include:

  • Inflationary concerns. 
  • Unfavorable interest rate dynamics. 
  • Financial exposure. 
  •  Rising import bill.

"Indeed, evidence from our proprietary ratings-based indicators suggests that the negative tone in regional corporate credit quality is slightly more elevated in comparison with prior quarters, even though it is still below the levels observed in the US or Europe," the rating agency said in a statement.


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Asia avoids economic downturn; risks loom: S&P