Hong Kong, April 10, 2012 -- Moody's Investors Service says exposure to Europe's economic
slowdown is not expected to result in rating changes for the vast majority
of rated corporates in Asia. This assessment is based on a scenario
in which European GDP declines by about 1% in 2012. A more
severe outcome in Europe would result in a reassessment of the impact
on Asian companies.
"Although many Asian countries rely on Europe for exports,
most of our Asian rated issuers are less exposed to conditions in the
euro area due to the domestic or regional focus of their businesses,"
says Ping Luo, a Moody's Vice President and Senior Analyst.
Luo was speaking at the release of a report titled "Exposure to
Europe Won't Affect Ratings of Most Asian Corporates,"
which she co-authored together with Chris Park, Vice President
and Senior Credit Officer.
"Under our base case scenario of a mild euro area contraction of
up to 1% in GDP for 2012, exposure won't impact the
ratings and outlooks of most rated Asian firms, based on their European
revenues and assets, as well as borrowing from European banks,"
Luo adds.
Out of 217 rated issuers in Asia (ex-Japan), only 13 (6%
of the total) report 15% or more of their revenue as being derived
from Europe. Eight of these issuers (4%) report that over
25% of their revenues are derived from the European market.
In the report, Moody's explains that reported revenues may
understate the degree of exposure of revenues to Europe. For example,
reported sales to Europe would not include sales of raw materials and
intermediate goods to non-European companies that become components
of finished goods sold to Europe.
Among the 13 issuers with reported revenues to Europe exceeding 15%,
a few are facing increased rating pressure. Although exposure to
Europe is not the sole source of rating pressure, the slowdown in
Europe has exacerbated concerns for these firms, particularly,
BW Shipping (Ba1 negative) and LG Electronics (Baa2 negative).
The sectors that are more likely to be adversely impacted by trends in
Europe include consumer-electronics, semiconductors,
shipping, port operators, palm oil producers, steelmakers,
and chemical manufacturers. The more domestic or regionally focused
sectors, with limited exposure to a euro area recession include
utilities, property, telecommunications, consumer/retail,
construction, building materials, and media.
In terms of funding, many Asian issuers have improved their liquidity
since the last financial crisis of 2008-2009, and most of
them are well positioned to manage potential disruptions from the deleveraging
of European banks.
Moody's survey of rated issuers indicates that only 17 of them have
more than 10% of their outstanding debt with European banks,
excluding Hong Kong Shanghai Bank Corp and Standard Chartered Bank.
Of these, 10 have cash on balance sheet that is over 100%
of debt maturing in the next 12 months.
Subscribers can access the report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_140589.
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Ping Luo
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service (Beijing) Ltd.
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Moody's: Exposure to Europe won't affect ratings of most Asian corporates