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Rating Headroom Drops for APAC Telcos on High Capex

The leverage headroom of Asia-Pacific telecom operators is narrowing, and is therefore likely to put near-term pressure on some of the ratings. We expect negative free cash flow to persist, as intensifying competition weakens the ability to fund rising capex and spectrum investments from cash generation by operations.

China Slowdown Would Hit Banks in Asian Developed Markets Most

Banks in these markets are among those with the strongest underwriting standards and risk controls in the region, but the downturn in economic conditions would test asset quality and add to their existing profitability challenges.

Revenue Diversity Key to Tencent's Resilience as China Slows

Tencent is relatively well positioned to deal with macroeconomic headwinds and competitive threats in China's internet sector due to its solid market leadership in multiple internet segments, large economies of scale and greater revenue diversity.

New Rules to Limit Chinese Corporates and LGFVs' Offshore Issuance

The Chinese regulator's recent changes in rules for offshore bond issuance by homebuilders and LGFVs are likely to keep Chinese corporate annual issuance flat in 2019, and will effectively cap it at this level in 2020.

RelatedNew Rules to Limit Chinese Corporates' Offshore Issuance

Higher Loss-Absorbing Capacity Rules to Slow Australia CVB Issuance

The Australian Prudential and Regulation Authority (APRA) in July 2019 announced its final rules on banks' total loss-absorbing capacity, which called on the four major banks to increase their capacity by 3pp of risk-weighted assets by January 2024.

NBFI Funding Squeeze to Hit Indian Property Developers Hardest

NBFIs are now also shying away from refinancing maturing debt of even large, proven developers to limit concentration risk to the sector. This is pushing developers towards alternative funding channels, such as private equity.

Structural Challenges Pressure Japanese Major Banks' Profitability

Evidence of banks increasing their risk appetite to improve profitability include higher exposure overseas and shifting into more complex structured notes from government bond holdings, although the extent varies among the banks.

 

Related Report:
Presentation: Japan's Major Banks

Chinese Steel Production to Drop After Rising to Record in 1H19

We expect steel production to decline in 2H19 due to three factors - a slowdown in housing construction, production restrictions led by environmental measures and market-driven production cuts on shrinking steelmaker margins.

Profitability Backs China Investment-Grade Homebuilder Ratings

Deteriorating market sentiment may lead to a moderate fall in home sales in 2019, driven mainly by falling volumes, especially in lower-tier cities where the sales of the past few years can no longer be sustained.

New U.S.-China Tariffs A Further Risk To Global Growth

U.S. President Donald Trump said on Thursday he would impose 10% tariffs on the remaining $300 billion of imports from China (the U.S. levied a 25% tariff on $200 billion out of around $540 billion of imports in May), beginning on September 1. The new tariffs broaden the goods being levied with additional tariffs and notably include consumer goods.

Additional Tariffs Raise Domestic Sales Risks on Indonesian Garment and Textile Sector

An Indonesia textile manufacturer focused on domestic sales - PT Delta Merlin Dunia Textiles (DMDT, CCC-) - said in July 2019 that it is facing financial difficulties due to increased competition from an influx of Chinese-made fabrics into the domestic market, among other reasons.

APLN's and DMDT's Financial Woes Not Indicative of HY Indonesian Liquidity Issues

Fitch Ratings believes the financial difficulties facing PT Agung Podomoro Land Tbk (APLN) and PT Delta Merlin Dunia Textile (DMDT) are not indicative of systemic liquidity challenges among the agency's rated portfolio of high-yield Indonesian corporates.

Webinar

Consumer Lending in Vietnam - Does Rising Leverage Add Risks in the Financial System?

Please join Fitch Ratings for our update on Consumer Lending in Vietnam. During the presentation, we touched upon these discussion points:

  • Consumer lending landscape in Vietnam
  • High household leverage and household debt-servicing capability
  • Are the mitigating factors strong enough to cushion the risk?
  • Fitch's view on the rating implications

 

Listen Now

 

Related Reports:
Vietnam Bank Sector More Vulnerable to Shocks as Leverage Rises
Consumer Lending in Vietnam

Rapid Growth Overseas May Put Pressure on Korean Banks' Profiles

South Korea's major commercial banks are likely to be slightly more aggressive in expanding overseas than we previously expected, in line with their parent holding companies' ambitious medium-term growth targets.

 

Related Reports on Korean Banks:

Hong Kong Protests Highlight Economic, Governance Risks

Large demonstrations have been held regularly since early June, inspired initially against an extradition bill that would have provided for the transfer of suspects to mainland China and other jurisdictions with which Hong Kong does not already have an extradition treaty.

Rising Household Debt May Weigh on Medium-Term Chinese Growth

Chinese household debt has continued to rise rapidly, reaching 85% of disposable income at end-2018. Rising servicing costs will weigh on economic growth in the medium term and this is reflected in our latest GDP forecasts.

 

Related Press Release:
Rising Household Debt May Weigh on Medium-Term Chinese Growth

Bailouts, Reforms Drive Chinese SOEs to Buy Listed Firms

Fitch has identified over 100 cases of A-share-listed POEs selling equity stakes to SOEs, including local government funding vehicles (LGFVs) and state-owned bailout funds, since the beginning of 2018. Around 80% of these deals have been announced since October 2018, after the central government called for state capital to bailout POEs in financial difficulty.

Indian Non-Banks' Relief from Funding Pressure Only Short-Term

The Indian government's partial credit guarantee on asset purchases from non-bank lenders will ease funding pressure on the non-bank sector in the short term, but it does not address investors' long-term concerns about the sector's exposure to stressed real estate.

Singapore Banks' US-Dollar Funding Stronger, but Untested

Fitch Ratings believes Singapore's three major banks have managed their US-dollar funding and liquidity risks generally well, aided by more diversified US-dollar funding sources. However, the underlying strength of their US-dollar funding remains untested under a stress scenario characterised by a severe deterioration in liquidity conditions. 

Korean Automakers' SUV Focus May Mitigate Operating Challenges

The earnings of Korean automakers are likely to continue improving in 2019 due to favourable foreign-currency exchange rates and better product mix, with the ratings of Hyundai Motor Company (HMC, BBB+/Stable) and Kia Motors Corporation (BBB+/Stable) supported by solid financial profiles and strong liquidity.

India Fiscal and Growth Outlook

Stephen Schwartz, Head of Asia-Pacific Sovereign Ratings, and Thomas Rookmaaker, Director and Lead Analyst for India of Sovereigns Ratings, discuss India’s fiscal and growth outlook, along with the key drivers of the sovereign rating.

Related:

rating action

Fitch Revises Outlook on Thailand to Positive; Affirms at 'BBB+'

The Outlook revision on Thailand's IDRs reflects increasing confidence that lingering political risks are unlikely to derail sound macroeconomic management. This is demonstrated by the sustained strength of external and public finances over the past several years, which has resulted in greater resilience to macroeconomic and financial shocks.

Stronger Consumer Brands, Retailers to Outperform in China's Challenging Market

China's retail sales grew 8.4% yoy in 1H19, slowing from 9% for the full year 2018, amid internal and external headwinds. Fitch expects certain segments of the consumer and retail market to show resilience despite the slowdown.

rating action

Fitch Affirms Japan at 'A'; Outlook Stable

Japan's ratings balance the strengths of an advanced and wealthy economy, with high governance standards and strong public institutions, against weak medium-term growth prospects and high public debt. 

rating action

Malaysia Affirmed at 'A-'; Outlook Stable

Malaysia's ratings balance strong and broad-based medium-term growth with a diversified export base, against high public debt and some lagging structural factors, such as weak governance indicators relative to peers. The latter may gradually improve with ongoing government efforts to enhance transparency and address high-profile corruption cases.

2019 Virtual Investor Meetings: Australia Structured Finance

The property market in Australia has always caught investors’ attention. Chris Stankovski, Senior Director, Structured Finance, Australia, shares his views on the market performance, outlook, and how the regulatory landscape for mortgages has changed in Australia.

rating action

Fitch Revises ANZ's Outlook to Negative; Affirms Ratings at 'AA-'

The revision of the rating Outlook to Negative reflects the risk that ANZ's focus on remediating operational and compliance risk issues and culture may result in the diversion of resources from ongoing operations, which could ultimately lead to a weakening of ANZ's earnings relative to peers. 

Factors Driving State Support in Corporate GRE Ratings in Asia

Fitch looks at four key factors to assess the likelihood of a Government-Related Entity receiving support from government, including the strength of linkage factors and incentive to support factors. The 58 rated GREs are from nine countries across industries.

 

Related Press Release and Report:
Factors Driving State Support in Corporate GRE Ratings in Asia
Considerations Behind Fitch's Analytical Approach to Rating Corporate Government-Related Entities (GREs) in Asia

2019 Late Cycle Roundtable - China’s Policy Response and Way Forward

In the second installment of our 2019 Late Cycle Roundtable series, Stephen Schwartz, head of Asia-Pacific Sovereign Ratings, and Andrew Fennell, director and primary China analyst, analyze China’s policy response to its slowed growth environment, its past economic cycle patterns, and other factors that may indicate future credit growth and capital market deepening.

2019 Virtual Investor Meetings: China Structured Finance

China Securitisation Market has seen phenomenal growth in the past few years. Hilary Tan, Senior Director and Head of Greater China Structured Finance, discusses the developments and key drivers behind the growth.​

rating action

Fitch Assigns Dongxing Securities First-Time 'BBB+' Rating; Outlook Stable

Dongxing Securities is an important subsidiary of China Orient Asset Management Co., Ltd. (China Orient, A/Stable) that provides capital market services to the parent and the parent's corporate customers over the course of distressed asset resolution. The company has been a subsidiary of China Orient since 2008 and is currently 52.74% owned by the group.

APAC Ports' Tight Rating Range Show Qualitative Factors Are Key

The ports in the Asia-Pacific rated by Fitch Ratings carry ratings of either 'BBB-' or 'BBB', but their leverage varies greatly from 2.9x to 10.2x, underscoring the importance of qualitative factors in assigning the ratings.

award

Fitch Wins Best Rating Agency for Emerging Market Bonds at Global Capital Awards

We are pleased to announce we have been voted the Best Rating Agency for Emerging Market Bonds at this year's Global Capital Awards. "Analytical excellence is a core focus at Fitch and this further recognition from global market participants underlines the quality of our emerging market analysis and commentary, as well as our broader market outreach efforts," Brett Hemsley, Global Analytical Head for Fitch Ratings.

Learn more about Fitch and Emerging Markets

Fitch Ratings Voted Best Agency for Chinese USD Bonds in 3 Categories

Fitch Ratings has been voted the "Outstanding Rating Agency for Chinese Companies' USD Bonds" in three categories by users of Wall Street Trader, a financial web application widely used by participants in China's debt capital markets. 

award

Fitch Ratings Named Best Islamic Finance Rating Agency for Third Year

Fitch Ratings has been recognised as the Best Rating Agency for Islamic Finance for the third straight year by The Asset, a leading financial magazine in the Asia-Pacific.

China Private Education Blue Book

Revenue growth in China's private education sector, which consists of private schools and private education service providers, is likely to moderate to high-single-digits, from the low-teens.

 

Other Blue Books

You may also access the links below for more In-depth industry and bond market analysis:

Contacts

Sing Chan Ng

APAC

Sing Chan Ng

Business Inquiries

+65 6796 7210

Stephen Schwartz

Sovereigns

Stephen Schwartz

Analytical

+852 2263 9938

Buddhika Piyasena

Corporates

Buddhika Piyasena

Analytical

+65 6796 7223

Jonathan Cornish

Financial Institutions

Jonathan Cornish

Analytical

+852 2263 9901

Terry Gao

International Public Finance

Terry Gao

Analytical

+852 2263 9972

Sajal Kishore

Global Infrastructure Group

Sajal Kishore

Analytical

+65 6796 7095

Jeff Liew

Insurance

Jeff Liew

Analytical

+852 2263 9939

Ben McCarthy

Structured Finance

Ben McCarthy

Analytical

+61 2 8256 0388

Bashar Al Natoor

Islamic Finance

Bashar Al Natoor

Analytical Group Head

+971 4424 1242

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