Debt markets in the six Southeast Asian economies including the Philippines will register sustained growth in both domestic and cross-border debt issues in 2015, Moody’s Investors Service said in a report released on Thursday.
In its quarterly report, the global credit ratings agency said generally supportive macroeconomic and market conditions in the Philippines, Indonesia, Singapore, Malaysia, Thailand and Vietnam provide a favorable backdrop for issuers to tap the market.
“A stronger economic environment augurs well for Asian credit supply in 2015. We expect real GDP [gross domestic product]growth to accelerate across the region next year,” it said.
Moody’s is also projecting a regional average fiscal deficit of 2.3 percent of GDP in 2015, with the largest shortfalls expected in Malaysia (3.3 percent) and Vietnam (4.7 percent).
In the Philippines, the report said post-typhoon reconstruction and a sustained roll-out of its public-private partnership program will help sustain infrastructure build-out in the country.
Meanwhile, the ratings agency also expects demand for bank credit in the region to remain robust next year.
Offshore funding more attractive
However, with the exception of the Philippines, it said loan-to-deposit ratios have tightened across the region, meaning that there are some limitations on the funding side.
“With this in mind, financial issuers could also tap the offshore bond markets to meet their capital needs and maintain asset growth in 2015,” it said.
Moody’s said that besides tighter funding constraints, banks will also look to optimize their capital structures in line with the implementation of Basel III regulatory requirements.
“In countries which have started implementing Basel III, the eligible amount of ‘old-style’ securities that will be recognized in a bank’s regulatory capital will be reduced by 10 percent a year through 2022, providing a structural tailwind for increased supply of Additional Tier 1 (Basel III-compliant) paper,” it said.
The latest Moody’s analysis is contained in its latest edition of Inside Asean, a quarterly publication looking at major credit trends prevalent in the Southeast Asian region.