December 15, 2021 (MLN): Fitch Ratings in its latest report issued today said that they expect improving operating sentiment following Covid-19-related restrictions to drive revenue growth and stable leverage for corporate issuers in APAC in 2022. Nevertheless, aggregate free cash flow should remain negative in light of ongoing high capex, the rating agency said.
As per the report, a record of 36 downgrades have been registered so far in 4Q21, higher than the Covid-19-driven previous peak of 32 downgrades in 2Q21, and triggered by liquidity issues facing the Chinese Homebuilding sector.
“The proportion of APAC corporates where we have a negative outlook, rating watch negative (RWN) or 'CCC+' and below rating has increased to 23% in 4Q21 from 18% in 4Q20 and 11% 4Q19. Notably, 14 or 30% of these are in the Homebuilding sector,” the report cited.
The report noted that seventeen APAC corporates are potential 'fallen angels' rated at 'BBB-'/Negative, of which 12 are Indian corporates which were in line with Fitch’s sovereign rating on India.
Fitch has published 12 sector-specific 2022 outlook reports for APAC Corporates. Its sole deteriorating sector outlook is on Chinese Property Developers, and its only improving sector outlook is on APAC Gaming.
Moreover, the rating agency has a neutral sector outlook on all other sectors (Autos, Oil & Gas, Palm Oil, Technology, Telecoms, Utilities, China Engineering & Construction, China Steel, Indonesian Coal Mining, and Indonesian & Vietnamese Homebuilders).
