S&P: Asia-Pacific ratings safe for now

Updated: 2011-08-08 15:04


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SYDNEY - Ratings agency Standard and Poor's said Monday that its historic downgrade of the US credit rating would have no immediate impact on Asia-Pacific sovereign ratings, but could have negative consequences over the long term.

Standard and Poor's (S&P) on Friday lowered the US issuer credit ratings to AA+ from AAA.

S&P says the US rating downgrade, together with weakening sovereign credit worthiness in Europe, points to an increasingly uncertain and challenging environment ahead.

"Uncertainties in the global financial market and weakened prospects in the developed economies have further undermined confidence," S&P said in a statement.

"The potential longer-term consequences of a weaker financing environment, slower growth, and higher risk aversion are negative factors for Asia-Pacific sovereign ratings."

But for the moment, it added, the outlook for most Asia-Pacific sovereign borrowers remains stable, underpinned by sound domestic demand, relatively healthy corporate and household sectors, plentiful external liquidity and high savings rates - though it listed New Zealand, Japan and Vietnam as exceptions to this.

However, the ratings agency said a fresh global financial crisis could hurt some Asian sovereigns harder this time around.

The agency said most Asian nations could respond promptly in a crisis to provide financial stability and economic stimulus, but others could be restrained by heavy reliance on offshore funding or by their budget "scars" from the last crisis.

It said countries such as Pakistan, Sri Lanka, Fiji, Australia, New Zealand, South Korea and Indonesia were vulnerable to disruptions in offshore capital markets.

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