Thailand's strong external and fiscal buffers make it less exposed to potential shocks than many Asian peers, according to Mr. Andrew Fennell, Director, Asia-Pacific (APAC) Sovereigns at Fitch Ratings. He also said the global sovereign rating cycle in 2017 is less negative, due to a synchronised improvement in global growth, trade volumes, and a stabilisation in commodity prices. Asia has continued to outperform the other regions, with three sovereign ratings currently on Positive Outlook. Nevertheless, the prospects of rising US interest rates, slowing growth in China, and rising protectionism represent some of the top global risks with potential spillovers to APAC.
In his presentation on the banking sector, Mr. Jonathan Cornish, Head of APAC Financial Institutions at Fitch Ratings, noted that headwinds faced by banking systems across the region are currently not as strong as they were heading into 2017 on account of stronger-than-expected growth in China this year, less volatility in commodity prices, and broadly sound macroeconomic backdrops. Nevertheless, operating environments face various near-term and longer-term challenges, with issues confronting Asia's banking systems not necessarily being uniform in nature and some banks better positioned than others to weather those challenges.
Emerging Asian markets now face challenges from rising US interest rates, with the prospect of similar domestic monetary responses increasing cost of funds for corporates, said Mr. Buddhika Piyasena, Head of Fitch's APAC Corporates group. A likely slowdown in China, and resultant weaknesses in industrial demand, will have implications for commodities. Further defaults in China are likely as the authorities try to address the debt build-up at corporates and local government-related entities and rein in excess industrial capacities, he added.
Fitch Ratings (Thailand)'s annual conference was attended by more than 250 executives and officials from the regulatory, investor, financial and corporate sectors. Mr. Predee Daochai, President, KASIKORNBANK and Chairman, Thai Bankers' Association, provided the keynote opening address.
In his welcome speech, Head of Fitch Ratings (Thailand), Mr. Vincent Milton noted that there has been considerable growth in the Thai bond market in the past six years, with private sector debt issuance by companies and financial institutions now equivalent to about 20% of Thailand's GDP, up from 10% in 2010, which is comparable to the proportion in China. This has largely been driven by acquisitions and investments by large Thai corporates during that period. In the past three years, there has also been an increase in issuance of lower-rated and unrated Thai corporate and foreign issuers from Laos. Future growth in Thailand's bond market will depend on a pickup in private sector investment as well as continued expansion of the issuer and investor base, Mr. Milton added.