Fitch APAC Investor Survey Flags Geopolitical, Abenomics Risks
19 December 2014 - 12:46PM
Business Wire
Results from Fitch Ratings' Asia-Pacific (APAC) fixed income
investor survey highlight APAC investor concerns that geopolitical
tension could upset regional credit markets and that Abenomics will
not deliver sustainably higher economic growth for Japan. Since the
survey closed on 25 November, some EM Asian currencies, asset
prices and spreads have come under pressure, although generally
less so than Russia.
Geopolitical risk was seen as a high risk to credit markets by
79% of respondents, a big jump from only 15% in Fitch's inaugural
APAC survey in August 2013. This is broadly in line with a similar
result from Fitch's latest European survey, where 85% of
respondents highlighted geopolitics as a high risk.
Investor concern over high-profile global sources of risk such
as the protracted crises in Ukraine, Iraq and Syria, rather than
regional Asian issues may have driven the results. In Asia,
inter-state tensions in the South China Sea, disputes between China
and Japan, and between North and South Korea remained in the
background in 2014. However, domestic political risks were
highlighted in Thailand following the military takeover of the
government in May, and by the outbreak of protests in Hong
Kong.
A majority 70% of investors do not expect Abenomics to succeed
in returning Japan's economy to a sustainable higher growth path.
Just over one-fifth of respondents even fear the policy will do
more harm than good by causing disruptive repricing in the
government bond market.
Japan's macroeconomic performance is a credit and rating
weakness. Fitch still thinks Abenomics has the potential to lead
Japan onto a stronger trend nominal and real GDP growth trajectory.
However, the Bank of Japan's aggressive easing underscores the
challenges the authorities face in getting the economy onto a path
of sustainably stronger real and nominal GDP growth via the
strategy of Abenomics. Persistent weak real and nominal GDP growth
has undermined Japan's public debt dynamics. The GDP deflator
contracted by an average 0.5% per year from 1992 to 2013. Nominal
GDP projected at JPY486.6trn in 2014 is not far above the
JPY483.7trn in 1993.
Fitch's survey of major fixed-income investors was conducted
from 9 October to 25 November 2014. The full survey report is now
available on www.fitchratings.com or by clicking on the link in
this media release.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch
Wire credit market commentary page. The original article, which may
include hyperlinks to companies and current ratings, can be
accessed at www.fitchratings.com. All opinions expressed are those
of Fitch Ratings.
Applicable Criteria and Related Research: APAC Senior
Fixed-Income Investor Survey 2014
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=823728
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