Moody's Investors Service expects the stable rating trend for Asia-Pacific non-financial companies to continue into 2018.
"The expectation reflects steady corporate earnings growth, supported by the expectation of continued steady momentum in economic growth for the global and Asian economies, the gradual normalisation of monetary policies by major central banks, and the continued availability of ample near-term liquidity," said Clara Lau, a Moody's group credit officer.
"However, several downside risks could destabilise this trend, including the escalation of geopolitical conflicts on the Korean peninsula, a rise in trade protectionism that would dampen the growth of export-oriented Asian economies, and financial market volatility arising from a faster than expected series of interest rate increases," said Ms Lau.
Moody's forecasts G-20 growth to be slightly above 3% in 2018, up from 2.5% in 2016 and moderately above the tally for 2017. At the same time, G20 emerging market countries are expected to grow at 5.4%, with China's growth moderately decelerating to 6.6% in 2018.
The gradual normalisation of monetary policy by central banks will also support companies' access to liquidity. Moody's expectation of a cautious monetary tightening by major economies, like the US and the EU, will keep corporate borrowing costs manageable and support their liquidity.
The debt maturity and subsequent refinancing needs of Asian corporates in 2018 will also be manageable.
Furthermore, the buoyant bond market evident in 2017 allowed many Asian companies to issue debt for refinancing and/or investments. In 2017, bond issuance was $34.5 billion, the strongest rated issuance level in history for Asia.
For Asia (excluding Japan and Australia), the share of ratings with stable outlooks at the end of 2017 increased to 80% from 60% in 2016, while those with negative implications decreased to 14% from 33% in 2016.
For Moody's Japan portfolio, ratings with a stable outlook rose to 82% at the end of 2017 from 66% at the end of 2016. For Australia, ratings with a stable outlook remained high at 84%.
Total negative rating actions (excluding non-credit driven actions) of the Asia-Pacific corporate portfolios were almost at par with positive actions in 2017, with 68 positive and 71 negative actions. Moody's adjusted rating trend tracker was 1.0x in 2017, notably higher than 0.3x in 2016.
