S&P predicts continued upward rating trend for Asia-Pacific sovereigns

By Angela McDaniels

Seattle, Feb. 27 - Standard & Poor's said that Asia-Pacific sovereign governments will likely continue their reform programs in 2006, which will improve each country's credit fundamentals and should continue the upward rating trend for the region.

Good global growth and still-ample liquidity conditions will underpin positive credit trends in the region, the agency predicted in a news release.

This trend should be assisted by probable robust GDP growth of 6% in the region, although S&P acknowledged that uncertainties such as sustained high oil prices, inflation and the strength of U.S. demand might affect growth.

"Regional growth prospects are projected to support credit quality, with trend growth rates likely to be maintained and some upside potential in China, India, Pakistan and Vietnam," S&P credit analyst Ping Chew said in the release.

"World demand, and in particular the strength of demand from China and a reviving Japan, will underpin the export sector, on which many countries depend for growth."

S&P said that Asia-Pacific sovereign ratings have improved steadily over the past few years: in the past three years alone, the agency upgraded 14 sovereigns and downgraded only four, while in 2005 there were four upgrades to one downgrade.

With the addition of Sri Lanka in 2005, S&P now rates 19 sovereigns in the region and 110 globally.

The agency detailed its predictions for Asia-Pacific sovereigns in a collection of reports published on Monday as the "Asia-Pacific Sovereign Report Card."

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