Asia-Pacific Credit Conditions Are Improving, But Tail Risks Are Rising
Credit prospects are better for Asia-Pacific economies given that market fears that were prominent a year ago have largely abated, according to S&P Global Ratings in a report published recently, titled, "Asia-Pacific Credit Conditions November 2017: Better Prospects, Fatter Tail Risks".
"For 2018, the uptrend in credit conditions is likely to continue. We expect global economies to generally pick up and Asia-Pacific countries, especially China, to continue expanding their GDPs," said S&P Global Ratings credit analyst Terry Chan. "What's more, the domestic and cross-border financing environment is still favorable--albeit with some tightening--indicating
improving credit conditions than those a year ago."
Growth in the region appears to be picking up on the back of a strengthening global economy in general and higher electronics demand. Roughly half of the region, led by Korea and Malaysia, is experiencing a boom in electronics exports.
However, tail risks--high-impact, low-probability threats--have become fatter. Conflict (North Korea), political, and trade (Trump) risks, while ebbing and flowing, remain.
Meanwhile, China's debt and the region's asset prices continue to climb. Taken together, the risk of investors pulling back
liquidity, particularly from the region's emerging markets, is still building up.
The rating agency considers asset repricing; China's debt overhang; a liquidity pullback; and geopolitical, trade, and physical conflicts remain as Asia-Pacific's top risks for 2018.
