The Latest from Fitch and Moody's

Fitch Ratings has said that Taiwan's presidential election result could help to improve cross-Strait relations and spur economic and financial reforms. President-elect Ma Ying-jeou, of the Kuomintang (KMT) won a decisive victory on 22 March, with 58.4% of the vote. Ma's KMT, in coalition with the Non-Partisan Solidarity Union, People First Party and New Party, dominates the legislature following elections in January. This marks the first time the legislative and executive branches of government have been controlled by one of Taiwan's major coalition groupings since 2000. "The combination of the legislative and presidential results could help address some of Taiwan's major rating constraints, such as tense cross-Strait relations and slow reforms related to the banking system and public finances," said Vincent Ho, associate director in Fitch's Asia sovereign ratings group. "The expected increase in infrastructure investment and various tax measures, however, could have negative impacts on public finances, which remain one of the major rating constraints for Taiwan," Ho added.

Philippine Banking Sector Report Reveals Regulatory Improvements
Moody's - 25 Mar 2008

Reforms to the Philippine banking system undertaken since the Asian currency crisis have helped to improve the regulatory and supervisory system, but confidence would be further enhanced by greater transparency, formalisation of procedures and institutionalisation of reforms, says a new report from Moody's Investors Service. "Bank credit risk in the Philippines has been elevated by a difficult operating environment, a new and developing supervisory and regulatory framework, and low level of government support," says Richard Lung, a senior analyst and author of the report, who also notes that proposed legislation, which would correct for some of the deficiencies in the supervisory framework, is pending in the Philippine Congress. The report notes that Philippine banks have historically faced little competition from the domestic capital markets or from non-bank financial institutions. As the dominant financial intermediaries, they have developed strong earnings profiles, which have been further buttressed by the fact that most of the large banks have universal banking licenses through which they can offer a wide range of financial services. However, banks in the Philippines are exposed to potentially high credit losses (as was experienced following the Asian financial crisis) due to their operating environment.

Malaysian Elections Will Not Impact Sovereign Rating
Moody's - 18 Mar 2008

Moody's Investors Service says that its A3 sovereign bond rating for Malaysia and its stable outlook remain unaffected by the outcome of the country's 8 March elections, which resulted in a sharper-than- expected drop in support for the ruling Barisan Nasional coalition. "The financial market turbulence that followed the election outcome should not affect Malaysia's credit fundamentals," says Aninda Mitra, a vice president/senior analyst with Moody's sovereign risk unit. "The government's ratings reflect the country's relatively strong growth and external payments position as well as its high savings rate and relatively well-developed regulatory and financial institutions," says Mitra.

Stability Sees Papua New Guinea Upgraded
Fitch Ratings - 18 Mar 2008

Fitch Ratings has upgraded Papua New Guinea's (PNG) long-term foreign currency issuer default rating (IDR) and its country ceiling to B+ from B. Fitch has also affirmed PNG's long-term local currency IDR at B+, and its short-term foreign currency IDR at B. The outlook is now stable. The upgrades recognise, in part, PNG's establishment of relative political and institutional stability for the sixth successive year and the progress the PNG government has made in managing public finances. "Sound economic policies, as well as electoral and structural reforms have set the stage for a relatively stable political environment and facilitated stronger, uninterrupted macroeconomic recovery in Papua New Guinea," says Ai Ling Ngiam, director in Fitch's sovereign ratings team. Prime Minister Michael Somare's re-election and stronger mandate achieved during the relatively peaceful July 2007 national elections underscores the credibility of policy continuity in the near term.