Asian corporates credit trend stable; downside risks rising

    Moody's Investors Service said that the credit trend for Asia-Pacific non-financial companies remained stable in 3Q 2018, buttressed by continued global economic growth and generally supportive monetary policy.
  "However, a slowdown in global growth amid tightening liquidity and intensifying US-China trade tensions poses downside risks ahead for the stable credit trend," said Clara Lau, a Moody's Group Credit Officer.
  Moody's conclusions are contained in its just-released report, "Non-financial companies - Asia-Pacific: Credit trend remained stable in 3Q 2018 but risks are increasing".
  At the end of 3Q 2018, the share of ratings with a stable outlook for non-financial companies in Asia-Pacific was 84%, similar to the 86% registered in the previous quarter. Meanwhile, the share of ratings with negative implications stayed low at 9%. Asia, Japan and Australia/New Zealand portfolios all displayed a similar stable trend in the quarter.
  The next round of trade intensification will likely be in January 2019 which will pose challenges to global growth and, in particular, create downside risk for China's growth. Negative global spillovers are likely, especially for economies integrated into the high-tech manufacturing supply chains such as Japan, Korea and Taiwan.
  Global liquidity tightening adds further pressure to the current stable credit environment. Moody's maintains its view that the Federal Reserve's monetary policy tightening is likely to continue.
  In this scenario, emerging market countries with high external debt to GDP ratios are more exposed to the risk of the disorderly capital outflows associated with tightening global liquidity as central banks in the advanced economies reverse quantitative easing measures.