Tuesday, January 20, 2009

Negative Watch

Owing to the credit crisis, it is natural that we see a lot more bonds being downgraded. The two tables saw a massive change in Fitch Ratings' view of rated companies/countries/sectors over the last two years. The percentages refer to the number of bonds that have been put on negative watch list (i.e. heightened possibility of default or further downgrades).

In the US, naturally banks saw a massive number being placed under negative watch, from just 9% to a shuddering 34%. What was gratifying was that corporates were not terribly affected with the number rising slightly 17% to 22%. Industrials had a higher correlation to the credit implosion and probably saw immediate reflection in deterioration of demand plus having to contend with excess capacity - those under watch jumped from 12% to 33%, almost as bad as US banks.

Latam banks held relatively steady but developed European banks is just as bad as US banks with their figure jumping from a benign 2% to a staggering 30%. The situation for banks in emerging European countries was even worse, rising from 2% to 35%. In fact, the whole of emerging European countries saw a debilitating number in grave danger of failing.

For developed Asian countries, there is some collateral damage but is not as debilitating. Emerging Asian nations also saw a sharp rise in those under negative watch but still below the averages.



p/s photos: Bowie Tsang Bo Yee (daughter of Tsang Chi Wai)

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