Asia Pacific credit ratings looking positive: S&P

Asia Pacific credit ratings looking positive: S&P

Agence France-Presse, Singapore

A terrorist bomb blast in Indonesia and a military mutiny in the Philippines have had little impact on overall credit ratings in the Asia-Pacific region due to strong fundamentals, Standard and Poor's (S&P) said on Wednesday.

S&P director for sovereign ratings Takahira Ogawa said confidence in both Indonesia and the Philippines have been shaken by the bomb attack on the JW Marriott Hotel last month and the mutiny in Manila in July.

"The direct impact of these events, however, on the sovereign ratings in the region were modest," Ogawa said in a preface to an S&P report card on sovereign ratings in the region released here.

"Generally, when there is an unexpected shock -- political or economic -- it is the strength of the macroeconomic fundamentals, fiscal flexibility and the ability to make effective and quick policy responses that influence the outcome from a credit perspective," he said.

Of the 18 countries and territories rated by the U.S.-based credit risk evaluator, three -- China, the Cook Islands and Thailand -- have positive outlooks.

Hong Kong, India, Japan and Papua New Guinea -- have negative outlooks while the remaining 11 have their outlooks listed as stable.

Australia, the Cook Islands and Indonesia have had their ratings upgraded while the Philippines has been downgraded due to fallout from the botched coup attempt by a group of junior military officers.

"Overall, despite the shocks and the emerging challenges in the Philippines and Hong Kong, the Asian credit story is looking more positive," Ogawa said.

"The unexpected strength of the U.S. and Japanese economies will strengthen the recoveries in a number of export-led economies in the region, reinforcing the consolidation of the post currency crisis years."

Singapore maintained its premium triple A ratings and stable outlook.

This reflects expectations the country's "very strong credit standing should remain secure against almost all foreseeable negative economic, geopolitical and security shocks over the medium term," S and P said.

S and P analyst Chew Ping noted a recovery across the region from the impact of Severe Acute Respiratory Syndrome (SARS) earlier this year and acceleration in domestic demand in China, India, Japan, Malaysia, Thailand and Taiwan, as well as continued growth in Australia.

Good fiscal results and budgets have also been seen in Thailand, Malaysia and Indonesia, Chew told a news briefing here, adding he was "cautiously optimistic" about Asia-Pacific banking systems.

But Paul Coughlin, managing director of Asia Pacific corporate and government ratings group, said some problems were notable.

"Political risk still muddies the waters in South Korea, the army mutiny in the Philippines highlights the widespread institutional weaknesses of the country and it remains to be seen if Hong Kong can stick to a coherent fiscal strategy under intense public scrutiny," Coughlin said.

"The apparent wavering over Hong Kong's fiscal policy is in stark contrast to the strength of Singapore's fiscal accounts and the decisive steps to lower labor costs... to remain competitive."