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Abu Dhabi, UAE, and Kuwait are the highest rated emerging markets sovereigns despite the ongoing coronavirus pandemic, according to the Moody’s Emerging Market Chartbook 2020 released on Wednesday.
While the global ratings and advisory agency rated GCC’s largest economy Saudi Arabia’s sovereign as A1, it gave a higher rating of Aa2 to Abu Dhabi, UAE, and Kuwait. Sharjah was rated separately at Baa2. All of Moody’s A and B ratings are investment grade.
The 2020 outlook for the sovereigns of Abu Dhabi, UAE, Kuwait, Saudi Arabia and Sharjah is stable, said the emerging markets (EM) chartbook. A sovereign credit rating, or a sovereign, is an independent assessment of the creditworthiness of a country or a sovereign entity.
The number of rated entities in the UAE was 44 - dominated by financial institutions and followed by insurance and infrastructure and project finance, showed data from Moody's Chartbook. In Saudi Arabia, the number of entities rated was 24, and majority of them were financial institutions.
The data in the Chartbook also showed that more than 60 percent of the rated issuers in the UAE have a stable outlook for 2020. For Saudi Arabia, 90 percent of the rated issuers had a stable outlook.
Financial institutions in the UAE, Saudi Arabia and Kuwait are in good health and their creditworthiness is in the positive territory, indicated the data collected by Moody's.
Out of 106 EM sovereigns rated by Moody’s, 31 were investment grade while 75 were sub-investment grade. Also, 74 sovereigns have stable outlook and 24 reflected a negative bias, it said.
However, Moody’s also highlighted the looming threats and risks because of the ongoing COVID-19 pandemic.
“The global recession is deepening as coronavirus-related restrictions exact a high economic cost, and we now expect real GDP to contract by 1.0 percent for G-20 emerging market economies in 2020,” said Denis Perevezentsev, a Moody's Vice President and Senior Credit Officer.
"We have already seen a large number of downgrades among high-yield corporates in recent months, reflecting the economic and financial upheaval the coronavirus has inflicted upon emerging markets,” added Perevezentsev.
Asia Pacific issuers account for 35 percent of all rated EM non-sovereign issuers, with 60 percent from China. A total 62 percent of the region's issuers have investment-grade ratings, and 69 percent have stable outlooks – down from 83 percent in September 2019. Negative bias is particularly high in India and Vietnam, where respectively 63 percent and 68 percent of ratings carried a negative outlook or were under review for downgrade as of April 30, 2020.
Asia Pacific has led growth in EM rated non-financial corporates, and now accounts for 49 percent of this category, and China for 35 percent.
The region's non-financial corporates have also driven EM Eurobond market activity, accounting for 64 percent of the $90 billion issued between January and April 2020.
(Reporting by Syed Atique Naqvi; Editing by Seban Scaria)
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