SINGAPORE -- Fitch Ratings lowered the outlooks of South Korea and three other emerging countries to "negative" from "stable" and cut the sovereign ratings of four others.
The agency said the Korea revision was rooted in issues involving the country's banking system. Overall, it said the revisions announced Monday for a group of emerging markets reflected concern about the impact from recession in the world's largest economies, lower commodity prices as well as reduced capital and financial market flows.
The four nations whose sovereign ratings were cut were Bulgaria, Kazakhstan, Hungary and Romania.
"The profound shift in the global economic and financial outlook pose significant real economy and policy challenges for emerging markets," David Riley, head of Global Sovereign Ratings Group at Fitch, said in a statement following a review of 17 major emerging-market economies.
Along with South Korea, Fitch also revised down the outlooks on the ratings of Mexico, Russia and South Africa to negative from stable.
"The revision to Korea's outlook reflects concerns that the deleveraging of the banking system may contribute to an erosion of the sovereign's external credit strengths, especially if it were accompanied by central-bank interventions in the currency market to support the exchange rate," said James McCormack, head of Asia sovereigns at Fitch.
On Monday, South Korea's benchmark index, the Kospi, gained 1.6%. The Fitch rating change came on the same day that Asian markets, in general, rallied in response to China's plan to stimulate its economy.
Fitch also said it was changing the outlook on Malaysia's long-term foreign-currency-default rating to "stable" from "positive."
Fitch said the risks of economic and financial stress that could undermine sovereign creditworthiness have risen, given that the recession in the world's key economies will likely be similar in duration and extent to slumps of the early 1980s and 1990s.
"Policy makers in emerging economies have even less scope for policy errors than their counterparts in so-called advanced countries," Mr. Riley said.
Emerging Europe is the most vulnerable emerging-market region due to the presence in many countries of large current-account deficits and relatively high levels of short-term external debt, Fitch said in its statement.
Countries with huge current-account deficits are more susceptible to reduced capital and financial market flows.
Since August 2007, Fitch has downgraded the foreign currency ratings of nine countries in emerging Europe by a total of 11 notches, compared with just three upgrades.
Write to Ditas Lopez at ditas.lopez@dowjones.com
No comments:
Post a Comment