Rising private-sector debt may hurt Asia bank performance in 2014: S&P

TOKYO - China’s slower growth could have spillover effects on countries such as Australia, Indonesia, Taiwan, Korea, and Hong Kong, according to Standard & Poor’s credit analyst, Naoko Nemoto. “Sluggish economic conditions, combined with a high level of corporate and household debt in some major economie,s will stress banks’ asset quality,” he says.

“In our view, the credit profiles of banks in Malaysia and Thailand are vulnerable to deterioration in the health of their respective household segments due to the rapid growth of household debt.”
Going against past trends, Asia-Pacific financial institutions are now more exposed to local/regional risks than external risks, says S&P. “In our view, the following stand out as potential risks: high private-sector indebtedness in many Asian countries, meagre economic outcomes from the region’s policies, a disorderly market reaction to the US tapering off its quantitative easing, and the eurozone debt problem.
“Although we see GDP growth in the Asia-Pacific region moderately improving to 5.4% from 5.3% in 2013, growth prospects in emerging countries such as China and India have weakened.” www.standardandpoors.com (ATI).