Region's companies not always cash rich

Asia-Pacific companies had lower levels of liquidity than their counterparts in developed markets, and many lacked the support of committed long-term bank funding, rating agency Fitch said, dismissing a commonly held belief that companies in this region are cash rich.

In a study of 150 Asia-Pacific companies rated A-plus and below yesterday, Fitch said Asia-Pacific companies, particularly in China, Japan and South Korea, relied more heavily on short-term, uncommitted funding.

Asia-Pacific companies were also more reliant on banks to fund their loans, the study found.

About 45 per cent of the total debts of Asia-Pacific companies were financed by banks, compared with only 27 per cent among their Western peers.

The culture of 'relationship banking' in the region meant corporates expected to renew their funding lines with banks, but could still find themselves cut off from credit lines if the region faced another financial crisis, Fitch said.

Fitch estimated that 22 per cent of Asia-Pacific companies' liquidity would be impaired this year if existing bank funding lines were not renewed, up from 12 per cent last year.

Separately, banking industry professionals worldwide listed liquidity, credit risk and macroeconomic risk as the top three threats to the banking industry, a survey by auditing firm PricewaterhouseCoopers and London-based Centre for the Study of Financial Innovation had found.