| Moody's Investors Service said that the outlook
for Asia Pacific sovereigns, corporates and financial institutions is generally stable,
while China's local government financing vehicles (LGFVs) are under pressure, but will
likely undergo consolidation and transformation.
"Our outlook for sovereign creditworthiness in Asia Pacific (APAC) in 2018 is stable
overall, reflecting a favorable growth environment that will amplify the credit benefits
of past reforms and encourage some sovereigns to implement further measures, particularly
in the emerging markets," said Martin Petch, a Moody's Vice President and Senior Credit
Officer.
"This favorable environment balances high leverage in various sectors, which continues
to represent a credit constraint for many sovereigns in the region," said Petch.
These conclusions -- among others -- are included in presentations and discussions which
took place during "Moody's 2018 Asia Credit Outlook Conference" on 31 January in Hong Kong
and 25 January in Singapore. The conference's theme was "Growth supports credit outlook,
despite risks in financial stability".
"With Asia's corporates, steady economic expansion and corporate earnings growth will
underpin expectations of stable credit quality and drive deleveraging," said Clement Wong,
a Moody's Associate Managing Director for Corporate Finance.
"On the issue of Chinese LGFVs, these entities will need to transform to adapt to a
changing operating environment, and we expect their credit quality will diverge even among
some located in well-developed regions," said Ivan Chung, a Moody's Associate Managing
Director for China research.
"With Asian infrastructure, the key trend we are seeing is greater funding diversity,
and this augurs well for the sector, given the huge infrastructure requirements apparent
in the region," said Ray Tay, a Moody's Vice President and Senior Credit Officer for
Project & Infrastructure Finance in Asia Pacific.
"A notable example was the Paiton Energy project bond issuance, which marked the return
of Asian project bonds raised in the offshore debt capital markets after many years of
absence," said Tay.
"And with Asia's banking sector, the outlook is stable as favorable economic conditions
support the banks' solvency and liquidity metrics," said Ray Heung, a Moody's Senior Vice
President for financial institutions. "Furthermore, macroeconomic conditions have
stabilized in most APAC economies and improved in some parts of the region, easing asset
quality risks."
"In the sector of insurance, a steady economic momentum across the APAC economies, led
by China (A1 stable), is driving demand. Together with the solid solvency levels of
insurers, these factors support a stable outlook for the region's insurance sector for
2018," said Qian Zhu, a Moody's Vice President and Senior Credit Officer.
"Insurers have also adapted to low interest rates by shifting to less interest-sensitive
products and increasing their allocations to higher-yielding non-traditional assets,
although for some -- such as Chinese insurers -- the latter has resulted in rising asset
risk," added Zhu. |
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