Fitch comments on ‘Emerging Asia’
Amid volatile global financial market conditions, and as uncertainty
persists over the strength of the global economic recovery, Fitch
Ratings has released a new report, “Emerging Asian Sovereign Pressure
Points”.
The report looks at a number of metrics to assess the potential
exposure of emerging Asian economies and their sovereign
credit-worthiness to a further sharp deterioration in the global economy
and/or heightened stress in the financial system. The agency stresses
that these contingencies do not reflect the agency’s base case.
Growth exposure
Thailand (Long-Term Foreign-Currency IDR (LTFC IDR): ‘BBB’/Stable)
combines high exposure to a global slowdown with limited scope for
monetary policy stimulus. By contrast, Indonesia (LTFC IDR:
‘BB+’/Positive) combines a track record of resilience to global economic
shocks with the most scope for a policy response.
The “continental economies” of China (LTFC IDR: ‘A+’/Stable) and
India (LTFC IDR: ‘BBB-’/Stable) are less exposed to a global growth
shock, but have less tolerance for policy stimulus at their current
rating levels, based on this analysis.
External financing exposure
Exposure to a sharp deterioration in global market liquidity as
judged by an adjusted liquidity ratio (ALR), which incorporates
portfolio equity liabilities, appears greater for Indonesia, Korea (LTFC
IDR: ‘A+’/Positive) and Malaysia (LTFC IDR: ‘A-’/Stable), and limited
for China, Taiwan (LTFC IDR: ‘A+’/Stable) and the Philippines (LTFC IDR:
‘BB+’/Stable). Emerging Asian exposure to a “sudden stop” in external
financing also appears limited, with only Sri Lanka (LTFC IDR:
‘BB-’/Stable) and India running deficits on their basic balances
(current account balance plus net FDI inflows).
“Emerging Asian Sovereign Pressure Points” is available on
www.fitchratings.com
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