(9 October 2015 – Malaysia) Despite facing increasing risk from a slowdown in global economic growth, and increased credit exposure, emerging Asian nations along with Southeast Asian banks have relatively stronger credit profiles now compared with before the 1997/98 Asian financial crisis says Fitch Ratings.
The rating firm’s head of financial institutions for the region, Ambreesh Srivastava, said that downside risks in many Asean banking systems had risen as a result of multiple factors including commodity price plunges, 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,” Srivastava said.
“Sovereign and external balance sheets are generally stronger than before the 1997 Asian crisis, but vulnerabilities have arisen in other areas,” Fitch’s head of Asia-Pacific sovereigns Andrew Colquhoun said.
“Global trade volumes have recovered much more slowly than in previous US recoveries, contributing to weak Thai and broader emerging-market growth.”
He added that high private-sector debt levels in many countries were a drag on domestic demand.
“Investor sentiment towards emerging market has worsened as the US Federal Reserve prepares to raise US interest rates,” Colquhoun said.