Asia Pacific economies to ease downward rating pressure

China's bottoming out will lead to balanced growth in property and infrastructure

PUBLISHED : Wednesday, 23 January, 2013, 12:00am
UPDATED : Wednesday, 23 January, 2013, 3:55am

Moody's Investors Service expects downward rating pressure to ease in 2013 as the Asian region, excluding Japan, significantly outperforms the weak global economy.

"China's bottoming out economy will lead to stabilising growth in property sales and infrastructure, paving the way for a gradual shift to a more stable rating trend," said Chris Park, senior credit officer corporate finance at Moody's. Moody's said economies in Asia were expected to outperform the continued weak growth in the global economy. It focused on expectations that China's economy has bottomed out, expecting a GDP growth rate of 7 to 8 per cent.

"This growth is sufficient to foster a gradual improvement in some corporate industry sectors and in the credit trends of industries in Asia that have been under pressure," Park said.

Accommodative monetary policies and quantitative easing measures by the US and central banks are expected in the outlook to continue in both advanced and emerging economies, resulting in ample liquidity which will fuel economic growth.

However, the report warned that negative rating actions would continue to outnumber positive moves. China's lower plateau for growth as it attempts to rebalance its economy and weak growth in key developed markets will affect the profitability and cash flows of exporters and companies in cyclical sectors.

"Base metal, coal mining, consumer electronics and shipping sectors in Asia are all expected to have a negative outlook," Park said. Moody's 2013 outlook expects the banking system in the Asia-Pacific to remain stable as it stays largely unaffected by negative credit pressures affecting banks in many Western economies.

"Interest rates will remain low, making an asset quality shock unlikely during this year in most Asian countries," said Stephen Long, managing director, financial institutions Asia Pacific at Moody's Investor Service.