APAC Corps to recover in 2021, but cash flow weaker than 2019

Newsroom24x7 Network

Sydney/Singapore: Fitch Ratings expects corporate issuers in APAC to continue to stage a gradual recovery in 2021. Nevertheless, Fitch expect aggregate 2021 revenue for their portfolio of 330 publicly rated Asia Pacific corporates to be 7% lower, and 2021 EBITDA 15% lower, than their pre-coronavirus forecasts.

Fitch has underscored pandemic-related factors contributed predominantly to 73 downgrades during 2020, exceeding 19 upgrades by 4x. Downgrades peaked at 31 during 2Q, but fell back during 3Q and 4Q. Liquidity issues and sector-wide market changes remain the two leading factors behind the downgrades, and illustrate two of the main areas in which the pandemic is pressuring ratings.

The proportion of APAC corporates where Fitch have a negative outlook, rating watch negative (RWN) or ‘CCC+’ and below rating fell back to 18% in 4Q20 from 22% in 2Q20, but still well above 4Q19’s 11%. Pandemic-related negative rating actions, according to Fitch are likely to continue during 2021, but at a much slower pace. At the same time, September 2020 marked the start of subsequent positive rating actions – reflecting the stabilisation, if not improvement, in operating conditions in the region.

Fitch has now published 13 sector-specific 2021 Outlook Reports for APAC Corporates. They have a negative sector outlook on one sector (Asian Palm Oil), an improving sector outlook on six sectors (Autos, Oil & Gas, Gaming, Indonesian Homebuilders, Indonesian State-Owned Construction, and Indonesian Coal), and a stable sector outlook on six sectors (Telecoms, Technology, Utilities, China Engineering and Construction, China Homebuilding and China Steel).

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