S&P Launches New Rating Scale for ASEAN Borrowers
Standard & Poor’s Ratings Services has launched a new credit rating scale that provides additional transparency about the credit risk of borrowers active in the ASEAN (Association of South East Asian Nations) region.
S&P says the new ratings will provide information for investors in the region’s developing debt markets, and help companies across South East Asia access new sources of capital.
ASEAN scale credit ratings have already been assigned to 19 issuers in the region (see Standard & Poor’s Releases 19 ASEAN Regional Scale Ratings). Standard & Poor’s ASEAN ratings are based on the same criteria and methodology as Standard & Poor’s global scale. The main difference between the two scales resides in calibration and basis of comparison: A regional scale rating is based on credit-risk comparisons within a specific region, while a global rating is based on global comparisons. The ASEAN rating scale is clearly marked with its own identifying prefix ax (for ASEAN).
S&P also provides Credit FAQ: ASEAN Regional Credit Rating Scale Explained, to address the most pertinent investor questions about the new scale.
In a related report Emerging ASEAN Sovereigns’ Business Cycles Show Significant Synchronicity, S&P finds a high correlation between the fortunes of the ASEAN economies and those of China, Japan and the US. Also, there is significant element of synchronicity of business cycles across ASEAN emerging economies, particularly first-generation members Malaysia, Thailand, Philippines, and Indonesia.
One significant implication of this pattern is that producers in these countries, particularly exporters, face synchronous business risks.
“This, in turn, feeds into risks faced by other businesses, which feed into exports as well as the risks faced by financial institutions, whose lending and investment activity is both directly and indirectly linked to export activity.”
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