Conditions in APAC to improve in 2021: Moody’s
19 Jan 2021
Conditions in Asia Pacific (APAC) are expected to improve in 2021, supported by the gradual recovery of economic activities, given the early containment of the pandemic in several Asian economies, said Moody’s Investors Service.
In a report, Moody’s said the ongoing fiscal and monetary support in both the advanced and emerging markets will also aid in improving conditions, but noted that renewed lockdowns in parts of the world have stalled the nascent global economic recovery and create uncertainty around improving credit conditions.
Moody’s group credit officer and senior vice-president Clara Lau said the rating trend for APAC corporates was overwhelmingly negative in 2020, with the number of negative rating actions hitting a record high of 254, against a low of 30 positive actions during the year.
“That said, the negative rating trend somewhat abated in the second half of the year, with the share of ratings with negative implications improving to 26 per cent at the end of 2020 from a high of 29 per cent in the second quarter of 2020,” Lau said.
Moody’s said although the negative rating trend will continue to ease over 2021, credit conditions for APAC corporates will differ by sector and region.
“China, as a result of early containment of the virus, is having a healthy improvement on the supply side, and its increasing household consumption will help to slowly broaden the recovery, offsetting the impact of slowing exports due to the resurgence of the virus elsewhere,” it said.
Moody’s expects that central banks will likely keep interest rates at very low levels and continue to provide fiscal and monetary stimulus, including asset purchase programmes and lending facilities for banks to boost lending to the private sector.
It said these supportive measures will be credit positive across sectors as they will lower funding costs and support corporates’ debt repayment capacity, but companies with weak liquidity and/or high leverage will continue to face refinancing risk.
Lau said ultimately, a sustained economic recovery, and thus a continued improvement in credit trends will depend on effective pandemic management, progress of vaccinations, and government policy support.