Asia-Pacific’s overall rating turns slightly negative in recent months going into 2019, says S&P Global Ratings

Asia-Pacific’s overall rating trend has turned slightly negative in recent months turned slightly negative going into 2019,  according to S&P Global Ratings’ latest publication titled, "Asia-Pacific Credit Outlook 2019".

For sovereigns, geopolitical tensions, increasingly protectionist trade  policies, and more recently, the emerging market rout, pose tail risks.  However, the still-steady economic conditions in major developed economies and  growing domestic demand will support sovereign ratings in the region.

In public finance, the Chinese authorities' slight softening of its policy tone is stabilizing infrastructure investment and the local regional government sector's reasonable credit growth.

The region's corporate sectors are likely to face tighter borrowing conditions in 2019. Meanwhile, the credit cycles for financial institutions in many Asia-Pacific jurisdictions (except for India--where nonperforming loans are high) are at their peaks. Insurers continue to face a largely stable operating environment, the report added.

Further, slowing demand growth, coupled with capacity expansion in display and semiconductors, pose a risk to the profitability and cash flows of information technology and consumer electronic companies. Competition is intensifying in several countries for telecommunications operators, albeit their credit quality is stable.

"The credit metrics of oil and gas companies are likely to improve in 2019, based on our oil price assumptions and corporates controlling their spending. For utilities, stable energy demand supports players, although higher fuel costs, particularly coal and oil, remain a risk," S&P Ratings commented in the report.