RPT-Fitch: APAC Sovereigns See Testing Times

Fri Jul 12, 2013 6:37am EDT

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July 12 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says its latest overview that Asia Pacific sovereigns, while broadly on Stable Rating Outlook, will be tested by shifting investor risk appetite amid a relative shift in the outlook for emerging versus advanced economies.

"This will emphasise the importance of credit fundamentals such as credible policy frameworks and robust fiscal positions," said Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch.

Fitch reviewed the sovereign ratings for all three of the region's giants during the quarter. The agency downgraded China's Long-term Local Currency Issuer Default Rating to 'A+/Stable from 'AA-'/Negative on 9 April. China faces the prospect of greater economic and financial volatility as its economy rebalances, with June's shock in the interbank market offering an example. Japan's ratings were affirmed 'A+' with Negative Outlook on 16 May. Japan's ratings remain under pressure from high and rising public indebtedness, although Abenomics could still help to stabilise the ratings if Fitch gains confidence that it can deliver sustained higher real and nominal GDP growth.

Fitch revised the Outlooks on India's 'BBB-' ratings to Stable from Negative on 12 June. Tighter fiscal policy and some structural reforms have helped to stabilise India's credit profile in the most recent assessment, although fiscal slippage in the new fiscal year to March 2014, if it happened, could still see negative pressure re-emerge.

The Overview also covers Macao for the first time, following the agency's publication of a 'AA-' IDR with Stable Outlook for the sovereign credit on 22 May.

This edition of the Overview additionally presents the results of audience polls taken in Hong Kong and Singapore during June's Global Banking Conference tour. Audience members were polled on their assessment of the chances that shadow banking would provoke a financial crisis in China, and on their views on the impact of Fed "tapering".

Link to Fitch Ratings' Report: Asia-Pacific Sovereign Credit Overview Q213

here

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