KUALA LUMPUR, Oct 9 ― Moody’s Investors Service today said that debt markets in the six Asean economies of Indonesia, Singapore, Malaysia, the Philippines, Thailand and Vietnam will register sustained growth in both domestic and cross-border issuance in 2015, following a gradual return to form since volumes fell in mid-2013.
“Generally supportive macroeconomic and market conditions, and the implementation of Basel III capital requirements will provide a favourable backdrop for issuers to tap the market,” said Moody’s Vice-President and Senior Research Analyst Rahul Ghosh in a statement.
Moody’s analysis is contained in its latest edition of “Inside Asean”, a quarterly publication looking at major credit trends prevalent in the Southeast Asian region.
Moody’s expected real Gross Domestic Product (GDP) growth to accelerate across the region next year as political risk subsides in Indonesia, Thailand and Vietnam emerged from a period of external rebalancing and banking system instability.
However, Moody’s said the regional average fiscal deficit should register 2.3 per cent of GDP in 2015 and ambitious infrastructure programmes would require heavy government funding from onshore and offshore funding.
Moody’s analysis also explored the still-fragmented Asean corporate landscape, noting that deeper financial integration between Asean member states were needed to boost intra-regional corporate expansion, currently stymied by deep differences in regulations and corporate governance.
Moody’s noted that low dollar funding rates and favorable liquidity profiles have allowed Asean companies to easily fund their global expansions.
Between 2004 and 2014, cross-border acquisitions within the Asean region represented just nine per cent of total acquisitions by Asean-domiciled companies, compared to 55 per cent for domestic acquisitions and 36 per cent for acquisitions outside of the Asean region, it said.
Singapore and Malaysia-based companies led the region, initiating 69 per cent of all cross-border acquisitions, because both these economies offered lower funding costs and deeper financial markets that encouraged regional expansion.
However, Moody’s noted that since the 2007 launch of the Asean Economic Community initiative, which sought regional economic integration, there had been no material pick-up in regional cross-border acquisitions, despite significantly increased intra-Asian foreign direct investments (FDIs), which grew to the current 28 per cent of total FDIs from three per cent in 2007.
Other regional positives included Moody’s recent upgrade of Vietnam’s issuer and senior unsecured bond ratings by one notch to B1 from B2, prompted by macroeconomic stability, its strengthening payments position and lower contingent risks from the country’s banking sector.
Moody’s also upgraded six Vietnamese banks, driven primarily by a stabilisation of the operating environment, and improved underwriting standards. ― Bernama
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