A RESURGENCE in COVID-19 cases during July and August across several Asia Pacific (APAC) markets could affect a number of corporates in the region in 2H 2021, thus weakening prospects for the reversal of pandemic-related negative rating actions.
This has led to Fitch Ratings having taken pandemic-related negative rating actions on a total of 78 entities, equivalent to 23% of its current portfolio of 344 publicly rated APAC corporates since the beginning of March 2020.
During 2Q 2021, there were 11 negative actions and 12 positive actions reversing pandemic-driven negative actions which marked the first quarter during the pandemic when reversals outnumbered negative actions.
“However, July saw no reversals of pandemic-driven negative rating actions,” Fitch Ratings pointed out.
Moreover, the potential for infection waves in a number of APAC markets to weigh on ratings was highlighted by the rating agency’s decision that month to downgrade Lippo Malls Indonesia Retail Trust to ‘B+’/Negative, from ‘BB-’/Negative following the temporary closure of its malls across Java, Bali and Medan due to re-imposition of pandemic-related restrictions.
Of the APAC corporates that Fitch Rating has taken negative rating action on due to pandemic-related concerns thus far, 17 remain on negative outlook. This includes nine Indian corporates rated at ‘BBB-‘/Negative that could be downgraded if India’s sovereign rating (BBB-/Negative) is downgraded.
“As we have previously stated, divergent recovery prospects among countries and companies will be evident in rating actions in 2021,” noted the global rating agency.
“Even as COVID-19 outbreaks challenge the outlook for some companies, prospects for others have improved. For example, we upgraded China’s Golden Eagle Retail Group Ltd to ‘BB+’/Stable in 2Q 2021 compared with its ‘BB’/Stable rating prior to the pandemic.” – Aug 19, 2021
