HONG KONG: Promising financial trends will “delink” the region from China in 2022, according S&P Global Ratings.
The agency says flush liquidity, healthy operations, low refinancing needs, and limited capital outlays among rated firms will help deleveraging and keep default rates low in the south and southeast of the continent.
“China and the rest of Asia are on divergent paths this year,” said Charles Chang, S&P Global Ratings’ Greater China country lead for corporates.
“China’s weak housing markets are squeezing issuers and driving defaults while in South and Southeast Asia we are expecting positive credit trends and very few corporate failures.”
The agency also expects absolute debt levels in India to fall by up to 7% on average in 2022 and 2023 for rated issuers. That would constitute a five year low.
In Indonesia, commodities have largely rebounded to pre-COVID levels and while ratings are still below where they were before the pandemic, those with negative outlooks dropped to a third from nearly 60% six months ago.
“These contrasting trends will benefit related issuers as investors diversify away from China’s speculative-grade markets,” said Mr. Chang.