Fitch: Asia Sovereign Ratings Resilient to US Negative Watch

HONG KONG/LONDON/SINGAPORE, October 18 (Fitch) The recent assignment of Rating Watch Negative on the US's AAA sovereign ratings is unlikely to lead directly to downgrades of any Asian sovereigns, even though these are among the largest holders of US Treasuries, says Fitch Ratings. US Treasuries are likely to remain among the most liquid financial instruments, and so would continue to underpin Asian external liquidity and sovereign credit profiles. Asian sovereign credit profiles have generally benefited from a strengthening of their foreign-currency balance sheets since the Asian Financial Crisis in 1997-1998. This has been driven by a rapid pace of reserve accumulation by most countries in the region, up until 2011. The growth in foreign-currency reserves has subsequently slowed. Moreover, this has recently dropped from a year ago in countries such as India, Indonesia, Mongolia and Sri Lanka, due to twin deficit pressures and lower net capital inflows. Nonetheless, regional reserves remain an important buffer against external shocks, and therefore underpin overall sovereign creditworthiness. This factor is not eroded by the Rating Watch Negative on the US's AAA sovereign rating. At end-July 2013, Asian governments owned around 26% of the total marketable Treasury debt. The largest holders were China and Japan, with 11% and 10%, respectively. Nine other Asian sovereigns held 5%. The latest data show that China and Japan have among the world's largest reserves - USD3.6bn and USD1.2bn, respectively. The foreign-reserve positions of countries such as Korea, Taiwan, Hong Kong, Singapore and India remain among the largest in the world - in excess of USD200bn. At end-September, IMF data showed that 62% of global reserves for which a currency breakdown is provided is held in US dollars. Andrew Colquhoun Senior Director, Sovereigns Tel: +852 2263 9938 Edward Parker Managing Director, Sovereigns Tel: +44 20 3530 1176 Aninda Mitra Senior Director, Fitch Wire Tel: +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.