How the Fed rate hike impacts Asia Pacific

Thomas Rookmaaker (Director, Sovereign Ratings, Fitch Ratings) said “India is not immune to potential general emerging market jitters related to the Fed lift-off, but it is better placed than many of its peers for a number of reasons. First, its external balances have significantly improved since mid-2013, with foreign exchange reserves rising by some USD65bn to USD353bn as of November 2015 and the current account deficit narrowing.

Andrew Colquhoun (Head of Asia-Pacific Sovereigns, Fitch Ratings) said “The rate rise was well-signalled and in line with Fitch’s expectation. The real uncertainty remains how quickly rates rise, and to what peak. There is still a significant wedge between where the Fed is telling us it sees rates going and what the market is pricing in. An out-turn closer to Fed guidance would be a substantial shock for a region where private sector debt levels have risen rapidly and where capital flows have already started to reverse. This uncertainty puts a premium on credible and coherent policy responses by authorities in buffering sovereign credit profiles.” 
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​How the Fed rate hike impacts India?
 
Thomas Rookmaaker (Director, Sovereign Ratings, Fitch Ratings) said: “India is not immune to potential general emerging market jitters related to the Fed lift-off, but it is better placed than many of its peers for a number of reasons. First, its external balances have significantly improved since mid-2013, with foreign exchange reserves rising by some USD65bn to USD353bn as of November 2015 and the current account deficit narrowing. Second, India is less dependent than several of its peers on commodity exports, and has thus not been negatively affected by the global rout in commodity prices. Third, only a small part of India’s sovereign debt is held by foreigners or is denominated in foreign currency. Fourth, India’s favourable economic growth outlook makes India relatively attractive for foreign investors.”
 
How the Fed rate hike impacts China?
 
Andrew Colquhoun (Head of Asia-Pacific Sovereigns, Fitch Ratings) said:
“The onset of sustained capital outflows since 2014 has added an external dimension to longer-standing concerns over the consequences of the rapid rise in debt across the economy since 2010. Lower Chinese rates might help to shore up corporate balance sheets and domestic demand, but would risk spurring capital outflows seeking rising US rates. The key question for China in 2016 could be whether the country can reconcile potentially conflicting imperatives on domestic and external financial stability.”
 
How the Fed rate hike impacts Hong Kong?
 
Andrew Fennell (Associate Director, Sovereign Ratings, Fitch Ratings) said: “Fitch does not expect higher US rates to materially impact Hong Kong’s sovereign credit profile. The territory has implemented seven rounds of macro-prudential tightening measures since 2009 to safeguard the financial sector from a property market correction, with loan-to-value ratios on residential mortgages averaging about 55% since 2012.  Hong Kong also has significant fiscal buffers in place, with fiscal reserves equivalent to 36% of GDP.  While a faster than expected rise in US interest rates could have spillover effects to growth and private consumption, Fitch considers Hong Kong’s large banking sector exposures to mainland China as the biggest risk to its sovereign credit profile. “ 
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How the Fed rate hike impacts South Korea​?​
 
Thomas Rookmaaker (Director, Sovereign Ratings, Fitch Ratings) said: “Korea is less vulnerable than many other countries in the region to external financing risk, for instance emanating from speculation surrounding the Fed policy. It benefits from persistent current account surpluses, high foreign reserves and a net external asset position. At the ‘AA-’ rating level a number of peers have even stronger external balance sheets, for example, those driven by large oil-related foreign currency inflows, but Korea is less dependent on commodity exports. Korea seems more vulnerable to a scenario of a severe slowdown in China. Exports traditionally play an important role in the Korean economy and already get hit substantially by the current drop in external demand. Bilateral trade with China accounts for roughly 25% of total trade and the trade with other emerging Asian countries for another 25%.”
 
​How the Fed rate hike impacts Philippines​?

Mervyn Tang (Associate Director, Sovereign Ratings, Fitch Ratings) said: “Fitch maintains a Positive Outlook on the ‘BBB-‘ rating of the Philippines. Fitch views the external finances of Philippines as a key credit strength. In Fitch’s view, steady current account surpluses since 2002 have led to a large build-up in foreign exchange reserves and that makes the Philippines more resilient than many other emerging market economies to any shift in global investor sentiment, following the Fed rate hike.”