Tuesday, July 24, 2012

Fitch Ratings: Ratings with negative outlook double

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/7/24/business/20120724122908&sec=business

Published: July 24, 2012

KUALA LUMPUR: Fitch Ratings said the number of ratings with negative credit outlooks has roughly doubled over the past six months, mainly due to the fallout from the eurozone.

The ratings agency said on Tuesday ratings with negative credit outlooks had increased across the sovereign (19.8% versus 10.3%), international public finance (48.3% versus 22.4%), financial institution (19.3% versus 10.7%) and insurance sectors (11.1% versus 5.6%).

In its latest global cross-sector credit outlook report, Fitch attributed it mainly due to new shocks centred on the eurozone, which continued to weigh down global economic recovery while also seeping through to other sectors and, to an increasing extent, other regions.

"By contrast, greater rating Outlook stability was shown in US public finance, corporates and infrastructure," it said.

Fitch said the weak US recovery reflected the gradual rebalancing of the economy, such as the unwinding of excessive household debt and the housing market correction, rather than a permanent downshift in the growth rate of the economy.

However, it pointed out the risks included uncertainty regarding fiscal policy and the diminished capacity for significant fiscal and monetary policy stimulus.

As for many large emerging markets, it said they were facing slowing growth and macroeconomic policy or rebalancing challenges.

"This is even as emerging market economies generally are showing impressive resilience to tough global conditions and are outperforming developed countries," it said.

The universe of highest grade ratings ('AAA' and 'AA') continued to shrink, with all eight global sectors seeing reductions since the end of 2010.

The sharpest decline occurred in international public finance, where eurozone sovereign downgrades had a negative knock-on effect and the high-grade rating segment halved to 26% in the last six months.

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