August 22, 2024 (MLN): Fitch Ratings expects the positive momentum in Asia-Pacific (APAC) exports to persist in the near term, with electronic and electrical product exporters capitalizing on the tech upcycle and deepening regional integration.

Several APAC economies benefit from strong investment in artificial intelligence (AI), a gradual recovery in consumer electronics shipments and continued adoption of electric vehicles.

New product launches with AI functionality could also shorten the replacement cycle for consumer electronics.

Leading suppliers of advanced AI chips in South Korea and Taiwan are ramping up production and investment to meet the surging demand.

China remains a dominant participant in global supply chains, although many multinationals are seeking alternatives to mitigate dependency on China, prompted by the gradual rise in Chinese labour costs, trade restrictions and supply-chain security.

Trade diversion from China could disrupt production at China-based plants and have knock-on effects for manufacturing supply chains across the region.

That said, some APAC exporters with established manufacturing ecosystems are well positioned to gain from a ‘China-plus-one’ strategy.

Fitch expects the solid export performance to elevate APAC’s economic growth prospects, which should be further boosted by investment inflows amid supply-chain diversification and improve credit metrics for some Fitch-rated APAC economies.

However, we do not expect any sovereign rating changes in the near-term as a direct result of the strong exports.

Improvements in metrics are likely to be gradual and the export outlook is subject to significant risks, including a sharper slowdown than the agency expects at key destination markets, like the US, EU and China, a resurgence in supply-chain disruption as well as the possible imposition of stricter trade restrictions following the late 2024 US elections.

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Posted on: 2024-08-22T10:56:58+05:00