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Refinancing risk in Asia to 'remain low and manageable' over next 5 years: study

REFINANCING risk in Asia-Pacific will remain low and manageable over the next five years with most of the maturing debt in the investment-grade category, says S&P Global Fixed Income Research.

According to their Asia-Pacific refinancing study, about US$1.2 trillion of Asia-Pacific financial and non-financial corporate debt rated by S&P Global Ratings is expected to mature from the second half of 2018 through 2023. 

"About 90 per cent of the total maturing debt in the region is in the investment-grade category, which tends to have longer maturities and lower financing costs," said Diane Vazza, head of S&P Global Fixed Income Research.

That said, a number of other key risks remain - climbing borrowing costs from US Federal Reserve rate hikes, the refinancing of dollar-denominated debt (due to an appreciating dollar), capital market volatility, and declines in investor sentiment stemming from global trade tensions.

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Speculation about a turn in the US credit cycle may concern maturing debt at the lowest rating levels, usually the most susceptible to refinancing risk if companies face adverse market conditions. However, only US$17 billion of Asia-Pacific debt rated "B-" or lower will mature in 2018-2023, and the largest share of this debt is from Chinese issuers, particularly those from the homebuilders and real estate sector, and consumer products sector.

The maturing debt in the Asia-Pacific region forms about 11 per cent of the total maturing globally.

About three-fifths of the debt belongs to corporate entities in Japan, Australia and New Zealand. Australia alone accounts for more than one-third of the total debt. The remaining debt belongs to companies in Asia (excluding Japan), with Chinese firms holding the lion's share of US$288.5 billion.