Fitch Ratings raise concerns on Asia-Pacific corporate deterioration
Fitch Ratings attributes this shift to the upgrade of various companies that were previously carrying a Positive Outlook
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NEW DELHI: Fitch Ratings has reported a further deterioration in its portfolio of Asia-Pacific (APAC) corporates during the fourth quarter of 2023.
As per Fitch Ratings, the cumulative net downgrades have reached a record high of 235 since early 2019, underscoring the ongoing challenges faced by businesses in the region.
Fitch Ratings notes a modest reduction in the number of net rating actions for the last 12 months, with a negative 25 reported in 4Q23 compared to a negative 28 in the previous quarter and a more significant negative 70 in the same period in 2022.
The stability in the proportion of Negative Outlooks at around 9 per cent by the end of 4Q23, compared with the end of the third quarter, is seen as a noteworthy development.
This marks an improvement from the 12 per cent reported at the end of 2022. However, there is a contrasting decrease in the share of Positive Outlooks, dropping to 7 per cent from 8 per cent.
Fitch Ratings attributes this shift to the upgrade of various companies that were previously carrying a Positive Outlook.
The net Outlook balance, a measure of overall sentiment, has maintained relative stability at around -1 per cent to -2 per cent since the end of June 2023.
This represents an improvement from late 2021 and suggests a cautious yet consistent trend in the rating outlooks for APAC corporates.
Within the sectors, the real estate and homebuilding industries continue to dominate the rating actions in 4Q23.
Notably, Tata Steel Limited emerged as a rising star with an upgrade to ‘BBB-‘ from ‘BB+’. However, Fitch Ratings highlights weak liquidity as the primary reason for rating actions during the quarter, indicating financial stress across various entities.
The report underscores the challenges faced by businesses in the APAC region, mirroring the complexities of the global economic landscape. While certain sectors experience rating upgrades, the overarching trend indicates a delicate balance between positive and negative outlooks.
As APAC corporates navigate economic uncertainties, attention remains focused on resilience and adaptability in the face of evolving financial dynamics.
