Fitch: Asia Sovereign Ratings Resilient to US Negative Watch

Reuters

HONG KONG/LONDON/SINGAPORE, October 18 (Fitch) The recentassignment of Rating Watch Negative on the US's AAA sovereign ratings is unlikely tolead directly to downgrades of any Asian sovereigns, even though these are amongthe largest holders of US Treasuries, says Fitch Ratings. US Treasuries arelikely to remain among the most liquid financial instruments, and so wouldcontinue to underpin Asian external liquidity and sovereign credit profiles.Asian sovereign credit profiles have generally benefited from astrengthening of their foreign-currency balance sheets since the Asian FinancialCrisis in 1997-1998. This has been driven by a rapid pace of reserveaccumulation 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 lowernet capital inflows. Nonetheless, regional reserves remain an important bufferagainst external shocks, and therefore underpin overall sovereigncreditworthiness. This factor is not eroded by the Rating Watch Negative on the US's AAAsovereign rating.At end-July 2013, Asian governments owned around 26% of thetotal marketable Treasury debt. The largest holders were China and Japan, with11% and 10%, respectively. Nine other Asian sovereigns held 5%. The latest data show that China and Japan have among the world'slargest reserves - USD3.6bn and USD1.2bn, respectively. Theforeign-reserve positions of countries such as Korea, Taiwan, Hong Kong, Singapore and Indiaremain 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 isprovided is held in US dollars. Andrew ColquhounSenior Director, SovereignsTel: +852 2263 9938Edward ParkerManaging Director, SovereignsTel: +44 20 3530 1176Aninda Mitra Senior Director, Fitch WireTel: +65 6796 7232Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234,Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +8522263 9935, Email: wailun.wan@fitchratings.com.The above article originally appeared as a post on the FitchWire credit market commentary page. The original article can be accessed atwww.fitchratings.com. All opinions expressed are those of Fitch Ratings.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLEON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'SCODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATEFIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLEFROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHERPERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN ANEU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUERON THE FITCH WEBSITE.

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