Bangkok--6 Oct--Fitch Ratings
In a report published today, Fitch Ratings says that the absence of a single common currency bond market, coupled with extensive, supportive and relatively robust domestic banking systems, means that primary funding sources for Asian corporates are likely to remain largely unchanged in 2012.
"The disintermediation of the banking system that we've seen in western markets hasn't occurred to anywhere near the same degree in Asia," said Tony Stringer, Managing Director and Head of Fitch's Asia-Pacific Corporates Team. While European corporates issued a record volume of G3 currency bonds in the first half of 2009, their Asian peers continued to rely heavily on existing bank funding arrangements. "Traditionally, international bond issuance in Asia has been dominated by sovereign-linked state-owned entities operating in sectors such as energy and infrastructure, with a small number of large privately-owned multi-national repeat issuers and a smattering of high yield names making up the balance," said Mr Stringer. "We don't anticipate a sea change in the funding composition for Asian corporates over the next few years, with local bank funding remaining the principal source of finance for all but the largest, most internationally diverse issuers," he added.
This continuing heavy reliance on bank debt - often ostensibly short term and uncommitted - carries some risks, as Fitch highlighted in its recent report "Corporate Liquidity Study - EMEA and Asia-Pacific". Although Asian banking systems are generally proving more resilient than their western counterparts through the crisis, the typical absence of committed facilities for corporate borrowers does leave them vulnerable to any sudden retrenchment and withdrawal of liquidity by the banking sector. While domestic bonds represent a growing alternative source of capital for corporates in some Asian countries - reflected by increased issuance in markets such as China - they currently remain a relatively small contributor to overall corporate credit creation. Fitch anticipates further growth in these markets over the next few years, driven in part by the policy priorities of some Asian governments.
The special report "Asia-Pacific Corporates in 2012" is available on the agency's website, www.fitchratings.com.
Contacts: Tony Stringer, Hong Kong, Tel: +852 2263 9559.
Media Relations: Karen Cho, Hong Kong, Tel: +852 2263 9935, Email: [email protected]; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].