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Asia surviving euro crisis
by hlk Thu 08 Dec 2011, 13:25
SINGAPORE: Asian economies are withstanding Europe’s debt crisis so well that some investors are positioning for credit-rating upgrades in the region.
Five-year credit-default swaps for China, South Korea, Indonesia, Malaysia, the Philippines and Thailand climbed an average 65 basis points to 163 this year, while contracts for 17 eurozone countries, excluding Greece, jumped 122 to 305.
Moody’s Investors Service was watching the trading in the swaps, which protect against non-payment, and how Asia coped with capital flows as it weighed rating changes, said Thomas Byrne, a senior vice-president at Moody’s in Singapore.
Asia’s 10 biggest economies excluding Japan grew an average of 5.2% in the third quarter, triple the eurozone’s 1.4% rate, and their central banks hold US$5.2 trillion in currency reserves, more than half the global total of US$10.2 trillion. Threadneedle Asset Management and Manulife Asset Management say they favour Indonesian notes, ranked Ba1 by Moody’s, one level below investment grade, while Aviva Investors says the Philippines, rated Ba2, is most likely to win an upgrade.
“If there’s continued good policy performance, macroeconomic stability in these countries and they weather this distress coming from the eurozone, in general that would be a credit-positive development,” Byrne said in an interview last month. “Whether there’s an accumulation of credit-positive developments that will lead to a credit-rating upgrade, we’ll be looking closely over the next months.”
Default swaps on Philippine bonds became cheaper than AAA-rated France last month, according to CMA, which is owned by CME Group Inc and compiles prices quoted by dealers in privately negotiated markets. It costs 183 basis points to protect Philippine bonds, less than the 187 basis points for France. Contracts for China, Malaysia and Thailand are lower at 131, 132 and 178 respectively, all more than half Italy’s 438.
The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. — Bloomberg
Five-year credit-default swaps for China, South Korea, Indonesia, Malaysia, the Philippines and Thailand climbed an average 65 basis points to 163 this year, while contracts for 17 eurozone countries, excluding Greece, jumped 122 to 305.
Moody’s Investors Service was watching the trading in the swaps, which protect against non-payment, and how Asia coped with capital flows as it weighed rating changes, said Thomas Byrne, a senior vice-president at Moody’s in Singapore.
Asia’s 10 biggest economies excluding Japan grew an average of 5.2% in the third quarter, triple the eurozone’s 1.4% rate, and their central banks hold US$5.2 trillion in currency reserves, more than half the global total of US$10.2 trillion. Threadneedle Asset Management and Manulife Asset Management say they favour Indonesian notes, ranked Ba1 by Moody’s, one level below investment grade, while Aviva Investors says the Philippines, rated Ba2, is most likely to win an upgrade.
“If there’s continued good policy performance, macroeconomic stability in these countries and they weather this distress coming from the eurozone, in general that would be a credit-positive development,” Byrne said in an interview last month. “Whether there’s an accumulation of credit-positive developments that will lead to a credit-rating upgrade, we’ll be looking closely over the next months.”
Default swaps on Philippine bonds became cheaper than AAA-rated France last month, according to CMA, which is owned by CME Group Inc and compiles prices quoted by dealers in privately negotiated markets. It costs 183 basis points to protect Philippine bonds, less than the 187 basis points for France. Contracts for China, Malaysia and Thailand are lower at 131, 132 and 178 respectively, all more than half Italy’s 438.
The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. — Bloomberg
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