China slowdown, foreign funding risks intensify for APAC economies: Fitch

Oct 19, 2015 (LBO) – Macroeconomic risks to the Asia-Pacific (APAC) region have intensified with Fed tightening cycle and a protracted China slowdown, Fitch ratings said in a statement.

“A sharper-than-expected slowdown in China’s economy is likely to have broad-based negative implications for global and regional issuers,” the latest edition of Fitch Ratings APAC Risk Radar said.

The full statement follows:

 Macroeconomic risks to the Asia-Pacific (APAC) region have intensified given the combined prospects of a Fed tightening cycle and a protracted China slowdown. A sharper-than-expected slowdown in China’s economy is likely to have broad-based negative implications for global and regional issuers, Fitch Ratings says in its latest edition of the APAC Risk Radar.

In an alternative scenario to Fitch’s base case, a more severe and abrupt decline in China’s growth rate would dramatically increase the likelihood of liquidity disruptions and market volatility. Under this scenario both developed (DM) and emerging (EM) economies would be negatively affected, with APAC countries poised to be the hardest hit.

Foreign funding risks have also come into sharper focus as currency weakness across most EM and key DM markets in APAC accelerated beginning 2Q15. The uncertainty over the timing of higher US policy rates against the backdrop of slower regional economic growth has caused investor unease. Pressure on APAC issuers may result from further capital reallocation away from EM, contributing to higher cost of funding and reduced access to capital markets.

The Risk Radar report is available at www.fitchratings.com or by clicking on the link in this media release.