APAC Emerging Market NBFIs Face Modest Refinancing Risks

Fitch Ratings: The refinancing risks of Fitch-rated APAC emerging market (EM) non-bank financial institutions (NBFIs) in China, India, Indonesia and Sri Lanka remain modest in aggregate despite higher reliance on short-term debt than other regions and high US dollar interest rates, Fitch Ratings says in a new report.

We estimate total debt maturing in 2024 for Fitch-rated APAC EM NBFIs to be around USD670 billion, with about 70% being domestic bank funding. Largely supportive domestic liquidity environments and bank funding will mitigate the refinancing and liquidity risk for the sector, supporting the neutral outlook for the sector’s funding and liquidity conditions for 2024.

Fitch-rated APAC EM NBFIs’ shorter asset tenor and historically stable funding access, which largely benefits from perceived shareholder or government support, help reduce the liquidity and refinancing risk. The issuers with ample funding access are also prone to borrow short-term to reduce funding costs.

We estimate the US dollar bond refinancing need for Fitch-rated Chinese NBFIs is around USD20 billion in 2024, or around 1.4% of their total assets at end-2023. Chinese NBFIs have resumed overseas bond issuance to refinance bond maturity in the first half of 2024 amid a more stabilised interest rate environment and improved investor appetite, but with higher coupons given higher US dollar interest rates. We expect their bond issuance will continue to refinance the remaining bond maturity in the second half of 2024, but the pace and refinancing cost will continue to be affected by the US dollar interest rates and international capital market conditions.

Indian NBFIs have minimal short-term US dollar refinancing needs in 2024, but have seen notable issuance activities. Refinancing in India will depend on onshore-offshore rate differentials, with tighter domestic liquidity potentially prompting more offshore bond issuances.

The full report, “APAC EM NBFI Refinancing Risk Report: 2024” is available at www.fitchratings.com or by clicking the link at the top of this media release.

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