Bangkok--10 Sep--Fitch Ratings Fitch Ratings (Thailand) Limited today hosted its annual conference in Bangkok, focusing on the outlook for the domestic economy and banks amid political upheaval. The conference also focused on the global credit crunch and its implications for Thailand and the region's economies and banks. Fitch was delighted to welcome M.R. Pridiyathorn Devakula, a former Finance Minister and Central Bank Governor to open the conference. Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand also provided a regulatory perspective on the resilience of Thai banks to the current turmoil. James McCormack, Head of Asia Sovereigns, indicates that the short-term outlook for emerging Asian economies is deteriorating based on synchronised GDP growth downturns in the US, Europe and Japan. "Emerging Asia is not immune from the fallout, and there is already evidence of weakness in the region's largest economies, China and India," noted Mr. McCormack. He also highlighted concerns regarding Asian inflation rates, many of which continue to move higher. "Real interest rates remain low in most countries, suggesting monetary policy is still broadly accommodative," added Mr. McCormack. On Thailand, Mr. McCormack said that while sovereign credit fundamentals remain sound, ongoing political uncertainty may eventually undermine the country's ratings, particularly if economic growth were to slow significantly, capital outflows were to accelerate, or economic policymaking is further disrupted. Commenting on the spread of the financial crisis beyond US subprime, David Marshall, Head of Asia Pacific Financial Institutions said: "The failure of Northern Rock in the UK was an example of a bank pursuing a strategy based on aggressive asset growth without putting in place reliable sources of funding and paying the price when the sources of liquidity it expected to be available proved not to be." On Bear Stearns that was brought down by a loss of liquidity, Mr. Marshall said: "The support extended to Bear Stearns by the New York Federal Reserve was also a new development and highlighted the fact that even broker dealers can be 'too big to fail' - not because of their importance as deposit-takers but as counterparties in swap transactions." On Fannie Mae and Freddie Mac, Mr Marshall noted that, had the US government not provided support, a default by either of these entities would have inflicted losses on investors around the world, including many Asian commercial and central banks. On the outlook for Asian banks, Vincent Milton, Senior Director of Financial Institutions and Head of Fitch's Thai Office, noted that: "First half results of 2008 for most banking systems in Asia remained generally good, despite the turmoil in credit markets and economic shocks from high oil prices. Fitch expects performance to deteriorate in the second half of 2008 and into 2009. But given regional growth remains well above developed economies, bank troubles should be more limited." Mr. Milton also noted that "Reporting one of the region's strongest results, Thai banks' performance improved substantially in H108 following two years of weak profitability. While overall results for the year should still be favourable, Thai banks are likely to face renewed asset quality and margin pressures due to higher funding costs and declining loan growth in H208." Mr. Milton added, "Also, if political troubles continue or the economy slows sharply, this could impact the banks' rating Outlooks in 2009." Contacts: James McCormack, Hong Kong, +852 2263 9925/ [email protected]; David Marshall, +852 2263 9911/ [email protected]; Vincent Milton, Bangkok, +662 655 4759/ [email protected]. Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215. itch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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. 101 Finsbury Pavement, London, EC2A 1RS