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Asian corporates set to see steady earnings growth in 2018: Moody's
STEADY economic expansion and corporate earnings growth are set to underpin the stability of credit quality for corporates in Asia (ex-Japan) in 2018 while refinancing requirements will also be manageable, according to credit ratings agency Moody's 2018 outlook on non-financial corporates in Asia, excluding Japan.
"Healthy economic growth in the Asian and global economies will support steady earnings growth for Asian corporates, which in turn will improve their financial leverage," said Chris Park, Moody's associate managing director.
"Furthermore, the gradual normalisation of monetary policy will support the near-term liquidity needs of corporates in the region," he said.
Moody's has indicated stable outlooks for key sectors in the region - the Chinese property market, oil refining and marketing, steel, telecomunications, and the power market - with some 88 per cent of investment-grade companies and 68 per cent of non-investment grade firms having stable outlooks at end-October 2017, up from 63 per cent and 55 per cent respectively a year ago.
"In terms of major macro themes, Moody's expects that growth within the Group of 20 will be slightly above three per cent in 2017 and 2018, up from 2.5 per cent in 2016, while China's GDP growth will slowly decelerate in 2018 as less policy stimulus is provided," Mr Park said.
The number of negative rating actions in Asia are also set to decline on the back of healthy macro conditions and stable liquidity.
However, Moody's indicated downside risks that lay ahead for Asian economies. This includes the protectionistic slant in US trade policy, which poses a threat to trade-reliant economies, the continued tension in the Korean Peninsula affecting regional trade and the deceleration in China's growth having a knock-on effect on Asian corporates.
On the other hand, Asian corporates stand to gain from upside risks of China's growth accelerating on the back of major stimulus programmes - which may boost regional economic growth and corporate earnings - while increased exports and earnings for Asian corporates is likely due to the better than expected growth in the US and the European Union economies, and the limited disruption from US interest rate normalisation measures.