Moody’s: Russia-Ukraine conflict raises credit risks for emerging market companies
KUALA LUMPUR: Nearly a third of rated nonfinancial companies in emerging markets would face heightened credit risks under a downside scenario in which, Russia’s invasion of Ukraine triggers a global recession and liquidity squeeze, Moody’s Investors Service said in a report yesterday.
The credit rating firm said under its baseline scenario, which assumed that commodity shocks and higher inflation and interest rates would result in lower global growth through 2023, the figure would be eight per cent.
“Even if ceasefires are negotiated, sanctions on Russia will remain in place through next year at least.
“The downside scenario assumes that a recession in Europe, potentially caused by a suspension of energy trade between Russia and Europe, triggers a global recession and severe liquidity squeeze and geopolitical risks remain high,” it said.
Vice president/senior analyst Rachel Chua said most nonfinancial emerging market companies that the financial services company rated have limited direct economic and financial links with Russia and Ukraine but would be affected by higher food and commodity prices and financial market disruptions, which would limit their capital market access.
She said the credit implications for companies vary, depending on their exposure to these channels and their capacity to offset the effects of these shocks.
The report said consumerfocused sectors that use commodities as inputs are most exposed to rising prices and industries such as automotive manufacturing are at risk from surging input costs and continued supply chain disruptions.
“Commodity-focused sectors will benefit from the conflict because supply disruptions will keep prices for their products high.
“The metals and mining and oil and gas industries have the highest proportion of companies that will benefit from these higher prices,” it added. — Bernama