Bangkok--20 Dec--Moody's Investors Service Moody's Investors Service says an increase in the number of negative rating outlooks on Asian non-financial corporates in the fourth quarter of 2007 may indicate that the region's credit trend could turn negative going into 2008. "The positive effects of the region's robust economic performance, which supported the Asian corporates' overall good credit fundamentals in 2007, could be dampened if tight liquidity drives interest costs higher, or if rising raw material costs continue to squeeze margins," says Clara Lau, a Moody's SVP and Chief Credit Officer. "As such, going forward, credit profiles in the region may weaken somewhat," says Lau in a new report reviewing credit conditions throughout Asia Pacific (ex-Japan) in 2007 and the outlook for 2008. "Looking ahead, three factors will most likely determine the direction of the region's credit ratings during 2008," says Lau. First, the disruption in the cross border debt markets caused by the US sub-prime crisis and the contagion effect on the rest of the capital markets, including equity markets, will remain a major concern. Liquidity management is a key credit risk and needs to be monitored closely, although systemic liquidity concerns have not appeared to date. However, if the credit crunch continues, companies with weak credit profiles or those that are highly leveraged will face financing challenges. Second, an economic slowdown in the US, depending on its severity, could, at a minimum, affect issuers that generate revenue from the US, like technology and trading companies, some Australian consumer products companies and listed property trusts, the report says. Third, the report says that regulatory issues pose a measure of risk in emerging markets, particularly China and India. The ratings of Chinese property developers are among the most exposed, given the government's persistent efforts to contain overheating in the sector. Reviewing 2007, Lau says rating trends between Asian and Australian corporates diverged during the year. For Asia's non-financial corporates, their positive rating actions were primarily driven by improved credit fundamentals, reflecting in turn a benign economic environment. Such a situation more or less balanced out negative rating actions and credit quality remained stable overall. The telecommunications sector led most of the positive actions in Asia, supplemented by select rated technology issuers. Meanwhile, negative rating actions were predominately driven by company-specific issues, including aggressive expansion and imprudent financial management, leading to liquidity or refinancing concerns. By contrast, Australian corporates displayed a clear negative rating trend as negative rating actions outpaced positive actions by a factor of four due to active M&A transactions. The report - entitled "Asia Pacific (ex-Japan) Corporate Credit Report: 2007 Review and 2008 Outlook" can be found at www.moodys.com