Moody's Investors Service says that its 2015 outlook for Indonesian nonfinancial corporates is stable, despite continued pressure on the country's coal industry.
"Continued but moderating GDP growth in Indonesia, as well as a stable political environment will continue to be supportive of key sectors such as oil and gas, property, telecommunications, media and consumer-related industries," says Brian Grieser, a Moody's Vice President and Senior Analyst.
"However, slowing growth in Chinese demand for commodities is a key risk, and will further pressure the credit quality of mining companies, in particular, coal producers," adds Grieser.
Grieser was speaking on the release of Moody's 2015 outlook for Indonesian non-financial corporates.
Moody's points out that more than 90% of Moody's-rated companies in Indonesia carry a stable ratings outlook.
Liquidity will be strong in 2015, as many Indonesian corporates have refinanced upcoming maturities. In fact, Moody's expects Indonesian corporate liquidity to continue to outperform the broader Asian trend over the next 12 months.
Moody's further points out that key corporate sectors — such as oil and gas, property, telecommunications, palm oil, and utilities and infrastructure — carry stable ratings outlooks. Only the coal industry carries a negative outlook, owing to Moody's expectation that excess supply will keep prices depressed, and lead to a further contraction in EBITDA margins across the sector.
As for the weak rupiah, Moody's expects that the majority of Indonesian companies can manage the weak domestic currency, as most are naturally hedged or have financial hedges in place.
Moody's would consider changing the outlook for Indonesian corporates to negative if: rising interest rates or a weakening rupiah restrain investment in core sectors like property or infrastructure; corporate issuers see liquidity deteriorate; or commodity prices fall further.
On the other hand, Moody's could change the outlook to positive if: the government enacts pro-growth policies; corporate earnings improve and lead to deleveraging; or there is a sustainable rebound in commodity prices.