Southeast Asia withstands debt crisis with enough reserves

Moody's gives “mostly stable” outlook to the region behind dependence on China banks than Europe.

The outlook for Southeast Asian sovereign and bank debt is “mostly stable” following the global financial crisis because export-driven economies with enough reserves helped shield the region, Moody’s Investors Service said.

“Sovereign credit fundamentals in the region have withstood the global turbulence of the past two years,” Tom Byrne, Senior Vice President with the Moody’s sovereign risk group, said at a briefing in Singapore on Tuesday. Banks in the region are more dependent on China than Europe, which means they’re not so exposed to risk from the European fiscal crisis, Moody’s said.

China’s announcement on June 19 that it plans to loosen a two-year dollar currency peg adopted during the credit crunch has boosted confidence that China’s growth will benefit regional economies. Moody’s said on June 14 that Asia-Pacific corporate defaults will “drop sharply” in 2010 as the region’s economy and credit markets strengthen.

“External positions are stronger now, reflecting a robust rebound in exports and resulting in record levels of official foreign exchange reserves for most countries,” Byrne said.

View the full story in Bloomberg.