Asia-Pacific sovereign rating trends should remain stable despite growing economic uncertainties: S&

14 July 2015 06:30 pm Views - 976

Standard & Poor’s (S&P) Ratings Services continues to expect stable trends for most sovereign credit ratings in Asia-Pacific despite the growing economic uncertainties this year, according to a report published yesterday, titled, ‘Asia-Pacific Sovereign Rating Trends Mid-Year 2015’.

“We do not expect weakening of some credit metrics so far this year to be material enough to trigger sovereign downgrades,” said Standard & Poor’s credit analyst Kim Eng Tan. 

China’s continuing slowdown, its struggle with asset deflation and the on-going uncertainties in the eurozone weigh on Asia-Pacific’s growth prospects. Factors supporting economic growth in the region are the continuing U.S. economic recovery, lower energy prices and still-plentiful liquidity in financial markets.

The continuing slowdown in China’s growth has weighed on other Asia-Pacific economies. Other factors adding to the perception of risk include China’s property market correction and its on-going stock market turmoil. 

“The deteriorating situation in Greece raises uncertainties further. We believe that the spillover from a potential Greek exit from the eurozone--somewhat less likely after the events in recent days--would be limited, given its small economy and limited international financial linkages,” Tan said. 

“Nevertheless, an unexpectedly severe and prolonged turn of international investor confidence cannot be ruled out.”

We do not believe domestic political developments in some Asian countries will affect the related sovereign ratings in the next one to two years. 
Nevertheless, they reduce the likelihood of new structural reform initiatives. They could also hurt the responsiveness of the governments to unexpected shocks.