EU debt woes to spare Asian economies – S&P

Asian economies, including Indonesia and the Philippines, would likely be spared from prospects of a credit downgrade as a result of the fiscal woes the 13-nation European Union is now experiencing, a senior executive at Standard and Poor's said Wednesday. Elena Okorotchenko, managing director and analytical manager at S&P's Asia sovereign and public finance unit, said that the global credit standing of European countries would likely be lowered should rather than emerging markets such as Indonesia and Philippines. “In our view, Indonesia is more exposed to external investor sentiment than the Philippines. This is because corporations in Indonesia still have a high level of external indebtedness, and because non-residents hold more than 20 percent of Indonesian government local currency bonds ─ making them part of the external debt in terms of investor behavior," Okorotchenko said in comments published by Financeasia.com. In the Philippines, domestic investors largely hold foreign currency-denominated government bonds, with the share of non-resident's very small. More than $15 billion in annual remittance inflows and central bank reserves that currently amount to about $46 billion support the Philippines external liquidity, making the country less vulnerable to shifts in external sentiment, Okorotchenco said. Both the Philippines and Indonesia have nearly completed external funding requirements for the year, according to her. “So, unless market interest rates for Asian borrowers rise and remain at elevated levels over many months, we believe that these two sovereigns shouldn't be affected much. Private sector borrowers reliant on external funding are somewhat more vulnerable." Many investors see emerging Asia, including "Indonesia and the Philippines as attractive investment destinations relative to many developed markets," Okorotchenco said. “This is due to their stronger growth prospects, better demographics, lower government debt burdens, and adequate external liquidity. We believe the combination of these factors is likely to maintain capital inflows into Asia," Okorotchenco said. Bangko Sentral ng Pilipinas Gov. Amando M. Tetangco Jr. earlier said the European debt crisis credit would have little impact on the Philippines and, if ever, would largely be on the export side as the ability of European economies to import goods and services is compromised. —VS, GMANews.TV