ASEAN corporate debt has been growing rapidly during the last few years, and constitutes 75% of ASEAN-5 GDP in 2014, surging from 66% in 2010, according to research released by Natixis
The study, which includes ASEAN Corporate Watch List, says the recent trend of capital outflows due to plunging commodity prices and the expectation of the FED’s monetary policy normalization makes it very timely to analyze how worrisome corporate leveraging may be for the region.
Based on aggregate data, the ASEAN Corporate Watch List shows that Singapore has the largest corporate debt-to-GDP ratio at 257% in 2014 but more micro level data indicates that Indonesian corporates are the most vulnerable.
As many as 7 Indonesian corporates are among the 10 riskiest based on the four financial indicators reviewed, with the rest being from Thailand. The worst corporates are mostly in two sectors: energy and materials, including coal, steel, oil & gas. There are two transportation companies among the top 10, namely in aviation.
The underlying reasons for the relatively small vulnerability of Singaporean corporate debt is that it is concentrated on financial institutions and that the stock of international reserves is larger so that it can cushion the debt burden in FC.
A more detailed analysis based on the 250 largest corporations in ASEAN confirms Indonesian corporates poll position in terms of vulnerability, not only above Singapore but also Malaysia. Philippines’ and Thailand’s corporates follow at an even larger distance.
ASEAN corporates in utilities, telecommunication and consumer services perform best in terms of Natixis' four financial vulnerability indicators.