When compared with global peers, ASEAN corporate health is sound thanks to low leverage and healthy revenue generation, despite heavy reliance on short-term funding and high interest rates, according to a special report published by Natixis Research.
Natixis’ debt and revenue growth metrics show that ASEAN corporates are generally healthy and should prove resilient in the face of external shocks.
Thai corporates are the healthiest while Vietnamese ones are the worst in terms of debt dynamics although a lot has gone to finance CAPEX and, thus, future growth, according to the report.
At the sector level, ASEAN is more exposed to domestic-oriented industries. These sectors, especially renewable and environment, airlines and utilities, also perform best in ASEAN economies.
In turn, ASEAN corporates in externally exposed sectors performed worst, which goes hand in hand with the weak global conditions they experienced in 2016. More specifically, compared with their global peers, ASEAN corporates underperform in the infrastructure, industrial and high-tech (semi-conductor) sectors.
There are a number of take-away from the report’s findings.
First, notwithstanding regular warnings from international organizations and rating agencies about corporate indebtedness in Asia, ASEAN corporates appear financially healthy, although with quite a lot of heterogeneity.
Second, given the recovery in the external environment in 2017, external-driven sectors, especially those less leveraged, are expected to perform better.
Third, although Vietnamese corporates are worse performers, their bet on CAPEX, by far the largest, bodes well for the future as long as the demand is there to support their growth.
Finally, Thai corporates clearly outperform the rest thanks to a very low interest rate and tax environment and not withstanding a relatively worse economic performance.