COVID-19 to challenge underlying assets in Asia Pacific
The outbreak of the COVID-19 and measures taken across the Asia Pacific (APAC) to contain will damage economic activity across the region and will negatively impact the performance of underlying assets in structured finance transactions, according to Fitch Ratings.
At the same time, the agency said it did not believe the disruption from COVID-19 would create negative rating risk in any APAC structured-finance sectors as long as the economic stress remains temporary and economic activity recovers in the near term.
“All APAC structured finance transactions are equipped with sufficient credit enhancement and liquidity to withstand any potential slowdown in cash flow and mild increases in delinquencies and defaults,” Fitch Ratings said.
“Travel, tourism, restaurants, hospitality, transportation and bricks and mortar retail are the most immediately affected sectors. In ABS, this translates into aircraft ABS and retail and hotel CMBS, neither of which are prominent in the APAC region.”
According to Fitch Ratings, China was the hardest hit by COVID-19 and was likely to be the jurisdiction with the greatest slowdown in economic activity in the near term, followed by South Korea and Australia.
Fitch said that self-employed and SME borrowers or employees of SME's were likely to be the most vulnerable category of borrowers in securitised portfolios, as they may had fewer resources to weather a period of no or low cash flow than salaried employees and large corporates.
AUTHOR
Oksana Patron
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
