World corporate risk “at peak levels”: Korea, HK, Singapore, Taiwan, Malaysia downgraded

PARIS – in its quarterly risk update, global credit insurer Coface says world corporate risk has reached peak levels with the average level of global risk now corresponding to B, ‘significant risk’. Coface says it has dropped its world growth forecast by 0.2 points to 2.5%.  Increasing numbers of emerging markets have been included in "extreme" and "very high" risk categories.

The report says the world economy is facing a "Japanese-style" growth trap.

“Since the international growth scenario announced by Coface last March, prospects have deteriorated slightly, and growth would appear to remain below 3% in 2016 for the 6th consecutive year,” it says.

“Companies have been penalised by this atonic "Japanese-style" environment: a lack of outlets and weak inflation reducing pricing power.”

Coface says the world's three largest economies have been affected by aggravated credit risk: after the downgrade of Japan to A2 last March, it is now the turn of the United States and China, downgraded to A2 and B respectively.

“In China, despite stable growth, stimulus measures are proving to have a limited effect due to overcapacity and excessive corporate debt levels,” Coface says.

“Unsurprisingly, this shock wave is spreading, to Canada on the one hand, downgraded to A3, and to several Asian countries on the other hand.

“For this reason, the assessments of South Korea, Hong Kong, Singapore and Taiwan have been downgraded to A3, and Malaysia to A4. These countries suffer from strong exposure to the Chinese structural slowdown for exports, tourism and investments.

“Furthermore, volatility on commodity markets, including oil, is penalising corporate business.”  www.coface.com (ATI).