Fitch: Emerging Asia Sovereigns Stronger Than Pre-Asian Crisis as Risks Rise
The event's guest of honour, Mr. Rapee Sucharitakul, Secretary-General of the Securities and Exchange Commission, provided the opening keynote address.
Mr. Andrew Colquhoun, Fitch's Head of Asia-Pacific Sovereigns, highlighted that the global environment has become tougher for emerging markets (EM), including Thailand. Sovereign and external balance sheets are generally stronger than before the 1997 Asian crisis, but vulnerabilities have arisen in other areas. Global trade volumes have recovered much more slowly than in previous US recoveries, contributing to weak Thai and broader EM growth. High private-sector debt levels in many countries, including Thailand, are a drag on domestic demand. Investor sentiment towards EM has worsened as the US Federal Reserve prepares to raise US interest rates.
Fitch affirmed Thailand's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB+' and 'A-' respectively with a Stable Outlook on 5 March 2015 - reflecting Thailand's core external, fiscal and macroeconomic policy strengths, which remain firmly in place. However, the agency also highlighted the emergence of negative pressures from weaker-than-expected GDP growth driven by highly levered household balance sheets, weak investment spending, and an uncertain political environment.
Mr. Ambreesh Srivastava, Fitch's Head of Financial Institutions - South and Southeast Asia, noted that downside risks in many Association of Southeast Asian Nations (ASEAN) banking systems have risen notably due to a collapse in commodity prices, currency weaknesses, and the after-effects of rapid credit growth, rising household debt and increased China-related risks built over the years.
Most ASEAN banks, though, have built up strong loss-absorption buffers to cope with a normal economic slowdown and hence have Stable Rating Outlooks.
Thai banks too have seen an increase in non-performing loans (NPLs) and special-mention loans (SMLs) over the past 12 months, but most have reasonable buffers in terms of reserves and capitalisation, which explains their Stable rating Outlooks even as the broader sector is displaying negative trends.
Mr. Adel Meer, Manager for Financial Institutions Group - East Asia and the Pacific for the International Finance Corporation (IFC), was the guest speaker at Fitch's event. Mr. Meer discussed IFC's support for financial market development in the Mekong CLMV region - Cambodia, Lao PDR, Myanmar and Vietnam along with Thailand - with an increased focus on frontier markets such as Myanmar and Laos.
Indo-China's frontier markets were discussed in greater detail in a roundtable that followed. Mr. Vincent Milton, Managing Director of Fitch Ratings Thailand, moderated a panel on the risks and opportunities in the CLMV region. Speakers on the panel comprised Ms. Sarah Canning-Jones, Counsel, Allen & Overy (Thailand) Company Limited; Mr. Chansak Fuangfu, Senior Executive Vice President & Director, Bangkok Bank Public Company Limited; and Mr. Bunn Kasemsup, Managing Director, SCG Trading Company Limited.
The conference was attended by more than 300 executives and officials from the regulatory, investor, financial and corporate sectors.
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