APAC lenders turn picky amidst trade disputes

China, Australia, New Zealand, and South Korea may be most impacted.

Recent trade disputes between China and the West may push lenders to turn more selective towards the “riskier sectors” of Asia Pacific.

In a report, S&P Global Ratings said that whilst the APAC region as a whole is still poised for growth in 2024, performance will be mixed per sector.

For lenders, there is a chance that they may become more selective on who and where they do business with. For example, they may be more selective when lending out to the real estate sectors in China and Vietnam.

Lenders may also be more cautious in markets where households are stretched most by high interest rates and cost pressures, notably Australia and New Zealand. South Korea is also facing rising unemployment.

Weaker domestic currencies, meanwhile, will benefit APAC’s chemicals, commodities, and energy exporters.

However, the weaker currencies will negatively affect airlines, transportation, raw material, or energy-intensive manufacturers, as well as “domestic conglomerates with diminishing cost pass-through ability,” S&P said.

Local government spending could remain elevated in China, Australia, and New Zealand, leading to growing debt levels, it further warned.

“In China, the protracted property downturn is pressuring local and regional governments' revenues and could slow their deleveraging,” the ratings agency stated in a press release.