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Eurozone still 'main threat' to Asia-Pacific creditworthiness

Publication Date : 11-10-2012


Standard and Poor's said yesterday that an unexpectedly severe deterioration in the eurozone was still "the main threat" to Asia-Pacific sovereign creditworthiness over the coming year.

"Reforms that address fundamental imbalances in the currency union are still in the early stages of implementation," credit analyst Kim Eng Tan said.

"If investors perceive that European politicians are losing the willingness to continue with reforms or if major policy mistakes occur, it may send another financial and economic shock across the world."

Of 22 rated sovereigns in the region, Standard and Poor's raised the credit ratings on the Philippines and South Korea over the past six months and revised the outlook on Vietnam from negative to stable.

"We upgraded the two sovereigns because their credit support improved sufficiently to offset weaker growth prospects in the next few years," Tan said. "Asia continued to register moderate economic growth despite the intensifying global economic uncertainties."

Tan added that Standard & Poor's did not expect the positive trend of rating changes of the past six months to continue in the coming 12-18 months.

The rating agency noted that credit growth had been strong in parts of the region over much of the past decade, notably in Australia, China, Hong Kong, Korea, New Zealand, and Singapore. In some countries, real estate prices have also risen "significantly" over the period.

"If inadequate policy responses to additional monetary easing from abroad fuel further financial leverage, the risks to economic and financial stability could mount, and that could damage sovereign creditworthiness," Tan said.


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