The spread of the novel coronavirus is severely damaging the global economy and this is likely to have a big impact on a wide range of corporate credit ratings, according to global credit rating agencies.
The US-based credit rating agency estimates that about 16 percent of the over 2,000 companies it rated in North America will be at great risk of rating moves due to the global downturn. Many companies are likely to be downgraded in new credit ratings due to the severe economic impact of the current crisis
Credit rating agency Moody’s said it is carrying out a global review of its corporate credit ratings in view of the pandemic and oil price falls — especially in sectors such as airlines, holiday cruises and oil companies which were hit very hard.
The US-based credit rating agency estimates that about 16 percent of the over 2,000 companies it rated in North America will be at great risk of rating moves due to the global downturn. Many companies are likely to be downgraded in new credit ratings due to the severe economic impact of the current crisis.
READ MORE: Joint efforts needed to reduce economic shocks
Anne Van Praagh, managing director of global strategy and research at Moody’s said the agency will do a considerable amount of new ratings by the end of the week.
Fitch Ratings has reduced its global economic growth forecast for 2020 to 1.3 percent - down from 2.5 percent in its December 2019 global economic outlook — weaker than global downturns in the early 1990s and in 2001, according to its latest quarterly Global Economic Outlook published on Friday.
"The level of world GDP is falling. For all intents and purposes we are in global recession territory," said Brian Coulton, chief economist at Fitch Ratings.
Recent emergency macroeconomic policies such as interest rate cuts, massive central bank liquidity injections, macro-prudential easing credit guarantee programs and substantive fiscal stimulus should start to boost growth from the second half of the year.
"Rapid and large-scale macro policy responses are all about damage limitation in the near-term, but policy easing should help GDP normalize and recover quickly in the second half of the year on the assumption that the health crisis subsides," said Coulton.
Fitch also noted that as the daily number of new COVID-19 cases in China has fallen sharply, this should pave the way for a marked economic recovery in the second quarter the year.
ALSO READ: Post-virus rebound likely in economic activity
However, the rapid spread of the virus outside China has prompted sharp declines in travel and tourism, and the cancellation of business and leisure events worldwide as “social distancing” takes hold.
Hong Kong stocks rallied on Friday together with other Asian stock markets. Investors were encouraged by government and central banks actions in response to the global economic recession caused by the virus outbreak.
The benchmark Hang Seng Index closed 5.05 percent, or 1,095.94 points, higher at 22,805.07. Market turnover totaled HK$171.3 billion.
In a bid to contain the virus, countries and regions have announced travel restrictions. Hong Kong-based low-cost airline Hong Kong Express said on Friday it would suspend all flights from next Monday to the end of April due to the coronavirus outbreak. Hong Kong Express parent company Cathay Pacific’s share price was down 1.1 percent to HK$ 8.07 per share.
Some stocks have seen double-digit rises. Meituan Dianping, China’s largest on-demand service platform, soared 16.20 percent to HK$84. China Mobile surged 13.58 percent to HK$54.8.
CK Asset Holdings gained 13.52 percent to HK$39.05 per share.
