Asian corporates’ resistant to Eurozone exposure: Fitch

The economic fallout from the current Eurozone crisis is manageable for most Asian corporates, although certain sectors and geographies are more vulnerable than others, says the ratings agency.

  • 28 Nov 2011
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The crisis could impact Asian corporates with large export exposure to European countries, but Fitch believes that these companies represent a relatively small group.

The reason for this is because a large amount of trade in Asia, and particularly growth in that trade over the last few years, has been within the region, noted Fitch in a research report released yesterday (November 24).

However, Japanese consumer electronics companies are more exposed to economic weakness in developed European markets than their Korean competitors, whose primary focus are in developing markets.

“The first route by which the eurozone crisis could be transmitted to Asia is reduced demand for Asian exports,” said Alex Griffiths, London-based senior director at Fitch Wire in the report. “The effect on Korean manufacturers will be reduced by product substitution in their favour in both regions.”

At a macroeconomic level, Fitch believes that China, India and Indonesia are less exposed to global growth shocks compared to smaller and more open economics of Thailand, Malaysia and Mongolia.

“They are not, of course, totally isolated – but we believe they have sufficiently developed domestic demand characteristics to offset the worst of any eurozone contagion for the majority of corporates whose business is largely domestic or regionally focused,” said Griffiths.

The eurozone crisis could also impact Asian corporates’ access to funding. However, the ratings agency declared that these entities are in a stronger position now than they were going into the 2008 downturn, with substantially lower leverage, said Fitch.

While aggregate free cashflow for rated entities across all corporate sectors is forecasted to be zero, capital expenditure (capex), which accounts for 80% of cashflow from operations, is deemed to be the largest contributor. Capex plans could be scaled back to preserve cashflow if needed.

Lastly, non-Asian investment in companies’ funding plans should not be overstated as the majority of Asian companies predominantly seek for financing from local or regional banks.

  • 28 Nov 2011

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Rank Lead Manager Amount $m No of issues Share %
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1 Citi 42,407.89 189 10.32%
2 HSBC 38,494.81 214 9.37%
3 JPMorgan 35,781.02 156 8.71%
4 Deutsche Bank 20,507.70 77 4.99%
5 Standard Chartered Bank 19,506.54 127 4.75%

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1 Citi 14,063.16 33 16.64%
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5 Santander 5,883.67 23 6.96%

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1 JPMorgan 16,133.76 64 12.48%
2 Citi 15,638.40 57 12.09%
3 HSBC 10,280.54 49 7.95%
4 Deutsche Bank 7,770.04 19 6.01%
5 BNP Paribas 7,584.94 21 5.87%

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1 ING 2,154.97 17 9.70%
2 UniCredit 1,729.43 12 7.79%
3 SG Corporate & Investment Banking 1,618.73 14 7.29%
4 Commerzbank Group 1,172.97 10 5.28%
5 Bank of America Merrill Lynch 1,155.31 8 5.20%

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1 AXIS Bank 7,937.37 101 21.68%
2 Trust Investment Advisors 3,739.50 97 10.21%
3 ICICI Bank 2,762.47 77 7.54%
4 Standard Chartered Bank 2,702.28 30 7.38%
5 HDFC Bank 2,035.28 56 5.56%