The Hindu : Business : Asia-Pacific markets will rebound in new year: S&P

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Asia-Pacific markets will rebound in new year: S&P

Special Correspondent

Call for balanced approach to
financial sector reform
Estimates India’s GDP growth
at 7 per cent in 2009

MUMBAI: Ongoing market dislocation will significantly impact Asia-Pacific in 2009 but factors such as intra-regional trade, supportive policy-making, and still-robust forecasts for China and India will help the region navigate the global storm.

As financial markets continue to deteriorate, the global economic outlook has worsened considerably, according to Standard & Poor’s Asia-Pacific Markets Outlook 2009, which covers credit and equity market prospects for 2009 as well as the macroeconomic outlook for the region.

Standard & Poor’s Asia-Pacific Chief Economist Subir Gokarn assesses the region’s prospects in the light of this weakened background. He observes that regional growth drivers such as strong domestic demand in China and India and the supportive monetary policy stances of the region’s governments will enable most economies to experience positive, albeit slowing, growth in 2009. Put simply, Asia-Pacific is expected to be able to roll with the punches although some economies such as Japan and Singapore are likely to experience quarters of negative gross domestic product (GDP) growth. “By the standards of 2006 and 2007, the year 2009 will not be an outstanding one by any means, but it will reflect the region’s resilience and collective ability to moderate fluctuations around a strong growth trend rate,” said Mr. Gokarn.

As a lagging symptom of slowing economic growth, S&P expects defaults of rated entities to increase in 2009, possibly climbing to double figures. “We have already witnessed the region’s portfolio of ratings move from the positive bias it enjoyed for the past three years into a negative bias,” said Regional Chief Credit Officer Ian Thompson. “The number of credits on negative outlook or credit watch negative represents around 19 per cent versus 5 per cent on positive. This, along with an enlarged portfolio of credit in the lower bands of our rating scale (what we call ‘speculative grade’) suggests further downgrades and likely defaults.”

For Asia-Pacific equity markets, a rebound is likely in 2009. Lorraine Tan, Director of Research, S&P Equity Research, believes markets are in the process of bottoming. “Although the economic and corporate news is likely to remain negative ‘and uncertainty still pervades the global financial system’ we see that markets will have retraced in line with, and in some cases exceeded, movements in previous bear markets in terms of both value and timeframe,” said Ms. Tan.

The report also emphasises the long-term need for a balanced and sustainable approach to financial sector reform as policy-makers try to restore confidence to the marketplace. “Neither unfettered nor over-regulated markets will meet the needs of our ever-growing and maturing regional economy,” said Tom Schiller, S&P’s Executive Managing and Head of Asia-Pacific.

PTI reports:

Playing a major role in dispelling the financial gloom in the Asia-Pacific region, India will record an economic growth rate of 7.3-7.8 per cent in 2008, global rating agency Standard and Poor’s said on Wednesday. It said the growth rate is likely to be lower at 6.5-7 per cent in 2009 as compared to 7.3-7.8 per cent this year. However, the official position is that the economy might see a rebound in growth during 2009-10.

The report further projected that consumer prices-based inflation would hover between 7.2 per cent and 7.6 per cent for the year 2008. On Monday, the Finance Ministry had said that inflation would soften due to the meltdown in global commodity prices.

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