Bangkok--8 Oct--Standard & Poor's
Positive economic data in Asia continue to emerge, supporting market expectations for a strong recovery in a region that was relatively well positioned as it entered the financial crisis. Our view is somewhat more circumspect, said an article published today by Standard & Poor's Global Fixed Income Research.
"Although it is clear that the region's economic downturn has bottomed out, we remain cautious about the pitfalls of managing a tough export market, the transition to a private sector-led recovery, as well as a premature withdrawal of stimulative policies," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research.
Moreover, the rapid pace of asset gains in the emerging markets has led to speculation about whether a carry trade has emerged, prompted by wide interest-rate differentials between higher-yielding emerging markets and lower-yielding currencies, such as the U.S. dollar, according to the article, titled "Asia Credit Comment: Will Economic Gains Create Woes For The Distressed Debt Market? (Premium)."
The risk associated with these global capital flows is that they could reverse course abruptly in response to factors independent of the region and cause recent gains in asset values to vanish.
"Even though the improved market sentiment might signal short-term caution for distressed debt investors in Asia, distortions created by the massive stimulus in place today could lay the foundation for distressed opportunities in the future," said Ms. Vazza.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect, atwww.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760