KUALA LUMPUR, Nov 16 — Credit trends remain broadly stable for infrastructure sectors in Asia’s emerging markets (EMs), including China, India, Indonesia, Malaysia, the Philippines and Thailand in 2019, said Moody’s Investors Service.
In its Global Emerging Markets Outlook for 2019, Moody’s said most rated issuers would continue to generate adequate operating cash flow under steady market structures and economic development.
“We expect that any tightening of global liquidity, pressure on local currencies or trade friction, particularly between the US and China, will be manageable for most companies,” it said.
Moody’s Investors said the escalating US-China trade tensions posed risks to the region’s growth.
“Under our baseline assumptions, incorporating a further escalation of US-China trade tensions, we still expect strong domestic demand and policy buffers to support solid, though slowing, Gross Domestic Product (GDP) growth.
“However, any further reevaluation of investment plans would hurt not just China but many other Asia-Pacific countries along the supply chain,” it said.
The potential for shifts in export production away from China to some of these economies could mitigate the negative impact, although supply chains do not evolve overnight, it added.
Moody’s Investors said slower global growth, rising interest rates, trade protectionism and geopolitical tensions posed challenges for emerging markets (EM) in 2019.
“Our broadly stable outlook incorporates the likely resilience of most EM issuers to these challenges, thanks to a range of different buffers, including strong balance sheets, domestic growth and supportive policy.
Nonetheless, credit stress could emerge for issuers operating in countries with macroeconomic imbalances or rising political risk, particularly those highly reliant on international financing.
“As global trade slows and financing conditions tighten in 2019, we expect median GDP growth in emerging economies in Asia Pacific to slow to 4.8 per cent, following an expected 5.8 per cent growth rate in 2018,” said Moody’s Managing Director Atsi Sheth.
This is still a robust growth rate, supported by domestic drivers such as rising household incomes, a growing middle class, expanding working-age populations and infrastructure investment, she added. — Bernama
Source: The Malay Mail Online