S&P: Asian securities are protected from Greek crisis

Viliyana Filipova — Sat, 01 May 2010 15:16:34 +0000

Government securities (GS) of developing Asian economies are protected from the Greek crisis and will perform well this year thanks to low levels of debt in these countries and because of the rapid growth of their economies. It predicts the international credit rating agency Standard & Poor’s, quoted by Bloomberg. Its economists point out that while government bonds of developed countries are less reliable because they are exposed to a deepening crisis of sovereign debt of Greece. William Hess, director of the division of Standard & Poor’s sovereign ratings for Asia, believes that the interest of investors to the region will increase, but the direct risk of transferring the debt crisis of Europe and Asia still remains limited. Asia surpassed other regions in contributing to the recovery of global economy this year, which happens for the first time in history, according to analysts at the International Monetary Fund (IMF). Countries like China, India and South Korea have caused the region to gain a record amount of foreign exchange reserves. This is the response from the Asian crisis in 1997-98, which showed that their central banks can not ensure the stability of local currencies and financial system. Now, the dynamic rates of economic growth in Asian countries, coupled with their low levels of debt, make them an attractive investment alternative. These factors will promote the strengthening of capital flows and the reduction in risk premiums in Asia, considered from Standard & Poor’s.
The IMF expects emerging economies in the Asian region, excluding Japan, Australia and New Zealand to mark the general economic growth of 8.5 percent this year and 8.4 percent the next. This is well above the forecast for growth this year from 2.2 percent in developed economies and one percent in the euro area. The credit rating of government bonds in China and South Korea is on the scale of A1 Moody’s, which is his fifth highest investment grade and more than that of Greece. This is Indonesia’s Ba2, which is its highest level in 11 years and two degrees below investment level. The budget deficit of South Korea last year was 4.1 percent of its gross domestic product and that of China amounted to 2.8%. Even less is the hole in the budget of Indonesia – only 1.6 percent of GDP in 2009

Financial Communique » Greek crisis

S&P: Asian securities are protected from Greek crisis