The firm has taken a negative rating action on 69 or 22% of its portfolio of 310 publicly rated APAC corporates since the beginning of March 2020

by DASHVEENJIT KAUR/ pic credit: petronas.com

FITCH Ratings Inc has revised the outlook on Malaysian companies Genting Bhd, Genting Overseas Holdings Ltd and Resorts World Las Vegas LLC to A- from BBB+, while Petroliam Nasional Bhd (Petronas) retained its rating in A-.

In the rating agency’s latest report titled “Coronavirus Mid-Year Recap”, “Fitch affirmed Genting, Genting Overseas and Resorts World Las Vegas’ issuer default ratings ‘Negative’ outlook, while Petronas remained in Negative’.”

Overall, the firm has taken a negative rating action on 69 or 22% of its portfolio of 310 publicly rated Asia-Pacific (APAC) corporates since the beginning of March 2020.

Analysts Matt Jamieson and Buddhika Prasad Piyasena in a note said they have downgraded 29 corporates, seven by more than one notch, and changed the outlook or watch on a further 40 corporates over this period.

“All these actions were driven — directly or indirectly — by the disruption caused by the coronavirus pandemic.

“We expect negative rating actions driven by Covid-19 to continue during the second half of 2020 (2H20); 55 or 80% of the total 69 APAC corporates that were subject to negative rating action during 1H20 either remain on negative outlook on rating watch negative, or are rated at the distressed rating levels of CCC+ and below,” they said.

To put things into perspective, June saw a total of 14 negative rating actions, in line with May’s total count of 15, but well below April’s 38.

However, the number of downgrades fell to just three in June (May: 8), whereas the number of outlook/watch revisions increased to 11 (May: 7).

Homebuilding, oil and gas (O&G), auto and related, and metals and mining sectors continue to dominate Fitch’s pandemic-related negative rating actions.

Among the 29 downgrades, Jamieson and Buddhika said the homebuilding sector leads with seven, followed by the O&G, auto and related, and metals and mining sectors with three downgrades a piece.

“The O&G and utilities sectors now top the list of the additional 40 corporates on which outlooks or watches were revised in a negative direction, following our outlook revision on India in June. In total, 14 outlook revisions relate to sovereign-related rating actions,” they added.

Meanwhile, the Apec Policy Support Unit forecast the region’s economic growth to decline by 3.7% in 2020, down from its initial forecast of a 2.7% contraction in April, bringing the total output loss to a staggering US$2.9 trillion (RM12.4 trillion).

The unit, in its latest report, stated that the Covid-19 pandemic is causing a deeper contraction to the region’s economy.

Director Dr Denis Hew said the protracted duration of the pandemic has caused worse than anticipated impacts on the global economy, with some economies recently reporting a second wave of infection cases.

“The economic recovery is on the horizon, but it is highly dependent on the availability of vaccines and treatments, as well as the effectiveness of economic policies that are being implemented by economies to address the pandemic,” he said in a statement yesterday.

The updated report projects an economic recovery for the region of 5.7% in 2021, compared to the earlier estimate of 6.3%.

This economic rebound hinges on whether the pandemic can be contained over 2H20.

The APAC region’s growth declined by 2.2% in the first quarter of this year due to travel restrictions and widespread lockdown measures that depressed domestic consumption, trade and investment activities.