September 19, 2017 / 1:39 PM / in a month

Fitch: QE and World Growth Buoy Global Rating Outlooks

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: [LONDON DESIGN] The Credit Outlook 3Q17 here LONDON, September 19 (Fitch) Global rating outlooks remain on an improving trend and are on balance less negative than at the start of the year across most rating sectors, Fitch Ratings says in its latest global Credit Outlook report. However, the improving outlook for global credit quality is underpinned by years of loose central bank monetary policy, including quantitative easing (QE), as well as what are now the strongest world growth conditions since 2010. "Looking ahead in the rating cycle, the most benign credit market conditions in modern history will gradually begin to normalise as central bank assistance is withdrawn and world growth peaks in 2018. This could begin to temper the otherwise upbeat rating outlook trend," said Monica Insoll, Managing Director, in Fitch's Credit Market Research team. Unwinding QE will pose challenges to both borrowers and lenders, including the many sovereigns with post-2000 high government debt-to-GDP levels. With a number of markets appearing to be approaching cyclical peaks, it may also expose potential asset bubbles, including those in buoyant housing markets such as Australia, Canada and some Nordic countries. Macro-prudential restrictions have been implemented in some markets, including tighter mortgage underwriting requirements and increased capital requirements for specific asset classes, which could mitigate the credit effects. Other risks to the rating outlook include US policy uncertainty and the potential for trade protectionism to develop, as well as political instability and corruption in Latin America, notably Brazil. In China, the focus on controlling credit and shadow banking raises the potential for policy mistakes, which could have unforeseen negative consequences such as undermining investor sentiment. The average net outlook balance across all sectors globally improved to -3.7% by 30 June 2017 from -7.7% at 31 December 2016. However, net rating outlooks remain in negative territory for all sectors except structured finance. [INTERACTIVE CHART LINK: <script id="infogram_0_86ad8f63-f3a0-46d3-95cb-d22b4cab9710" title="170147 Summary chart Overview Chart 2" src="https://e.infogram.com/js/dist/embed.js?FsP" type="text/javascript"> The greatest sector improvement took place in sovereigns where some developed market countries, in particular, are displaying improving fundamentals. This is supported by stronger global growth, recovery in global trade and stabilising commodity prices. Political risks remain high but confidence has grown in these being manageable. Emerging market sovereigns have also turned the corner, although downward rating pressure persists especially in Latin America and the Middle East and Africa. Both corporates and financial institutions are also on a modestly improving outlook trajectory and are following the pattern in sovereigns with net outlooks becoming less negative in both developed and emerging markets. Problems in Latin American corporate and banking sectors, notably Brazil, are gradually easing but political instability and corruption continue to pose risks. Our six-monthly credit outlook report provides an overview of Fitch's outlooks across all rated sectors and regions, identifying the main macro factors that will drive credit trends over the next 12-24 months. It focuses on outlook outliers - negative and positive - as the vast majority of ratings are typically stable. The data in today's report is as of 30 June 2017. The Credit Outlook is published semi-annually. It is available at www.fitchratings.com or by clicking the link above, or here x.html for an interactive version of the report. Contact: Monica Insoll Managing Director +44 20 3530 1060 Fitch Ratings Limited 30 North Colonnade London E14 5GN Stuart Jennings Regional Credit Officer EMEA & APAC +44 20 3530 1142 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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