Ongoing fiscal and monetary support in both advanced and emerging markets will also aid improving conditions, but renewed lockdowns in parts of the world have stalled the nascent global economic recovery and create uncertainty around improving credit conditions.
- A combination of gradual economic recovery – driven by China – and ongoing fiscal and monetary support will abate the negative rating trend seen in 2020
- The share of ratings with negative implications in the APAC corporates portfolio improved to 26% at the end of 2020 from 29% in Q2 2020
“The rating trend for APAC corporates was overwhelmingly negative in 2020, with the number of negative rating actions hitting a record high of 254, against a low of 30 positive actions during the year,” says Clara Lau, a Moody’s Group Credit Officer and Senior Vice President.
Although the negative rating trend will continue to ease over 2021, credit conditions for APAC corporates will differ by sector and region.
China, as a result of early containment of the virus, is having a healthy improvement on the supply side and its increasing household consumption will help slowly broaden the recovery, offsetting the impact of slowing exports due to the resurgence of the virus elsewhere.
Moody’s expects central banks will likely keep interest rates at very low levels and continue to provide fiscal and monetary stimulus, such as asset purchase programs and lending facilities for banks to boost lending to the private sector.
These supportive measures will be credit positive across sectors as they will lower funding costs and support corporates’ debt repayment capacity. But companies with weak liquidity and/or high leverage will continue to face refinancing risk.
“Ultimately, a sustained economic recovery and thus a continued improvement in credit trends will depend on (1) effective pandemic management, (2) progress of vaccinations, and (3) government policy support,” concludes Lau.
Thai Credit Guarantee Corporation (TCG) Will Launch Bad Debt Guarantee Program for SMEs
The program will also cover SME loans that have turned into non-performing loans (NPLs), defined as loans overdue by more than 90 days, although these NPLs must not exceed two years of overdue payment.
BANGKOK (NNT) – State-owned Thai Credit Guarantee Corporation (TCG) is preparing to launch a 20-billion-baht bad debt guarantee program to assist struggling small and medium-sized enterprises (SMEs) saddled with bad debts.
Can the Subscription Economy Save Financial Services?
Going back to the pre-Covid “normal” is not an option for financial services. Fortunately, the rise of the subscription economy points towards frontiers of untapped growth for the sector.
As the world waits for mass vaccination to revive economic activity, general malaise has overtaken the financial services industry (FSI). And things will probably worsen before they get better: US banks are expected to suffer US$318 billion in net loan losses by the end of 2022, according to Deloitte.
Asia Pacific Banks shrug off commercial property risks for now
APAC commercial property prices were down around 3% on average in 2020, after a 1% rise in 2019. But the coronavirus-induced decline has been modest compared to past downturns, suggesting that the impact on banks’ commercial real estate loans will generally be much smaller this time.
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