Rating outlook improves for APAC corporates

S&P Global Ratings has released its Asia Pacific credit outlook report, which predicts a slower pace of earnings growth and weaker demand for corporates due to multiple challenges in the region, such as supply chain issues, high input costs, rising interest rates, weak consumer demand, and persistently high inflation. Despite these challenges, the report still expects to see an increase in revenues and profits, but at a slower pace than last year. To manage these conditions, companies are increasing their prices, managing costs, and practicing more prudent capital management.

The report also highlights that commodities are expected to have a good year in 2023 in countries such as Australia, Indonesia, and Japan, while India is expected to have a bright spot following de-leveraging across corporates. Meanwhile, sectors such as airports, utilities, and Korean conglomerates are expected to benefit from regulatory changes and a boom in global sales of EV batteries. However, the report also notes that Japanese electric utilities will face challenges due to increasing fuel prices and a weaker yen, while the property sector, particularly in China, is expected to be bumpy. Export-led sectors such as autos, electronics, and machinery will also face challenges.

The majority of S&P's ratings across Asia Pacific corporates are stable at slightly above 80%, and negative outlooks have decreased from 15% in 2022 to around 10%. Japan has the highest proportion of negative outlooks, while healthcare, mining, and real estate are the sectors with the highest proportions of negative outlooks. However, Indonesia is currently showing no negative outlooks, reflecting improvements in conditions in the country over the past 12 months. Overall, the report suggests that although Asia Pacific corporates are facing challenges, they are managing the conditions and still expect to see an increase in revenues and profits.

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