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Carillion Highlights Key Construction Sector Risks

The collapse of UK construction company Carillion highlights the importance of contract risk management and of maintaining margins for companies in the European engineering and construction (E&C) sector. The sector is largely sub-investment grade, but investment-grade ratings are possible where both the business and balance sheet are prudently managed. 
 

Fixed Interests: China’s growth potential will fall to 5.5%, well below India’s in next 5 years

On the latest Fixed Interests, senior members of Fitch’s Economics and Sovereign teams discuss potential growth rates of the largest emerging markets. Analysis highlights the importance of demographic factors and investment rates, placing India ahead of China over the next 5 years with projected GDP growth of 6.7% versus 5.5%.

Credit Hotspot: Political Hotspot

Latest: Political Risk A Key Theme for LatAm Sovereigns in 2018 

China's PPP Rules to Cool Infrastructure Investment

Tighter regulations on public-private partnerships (PPP) released by the Chinese authorities in late 2017 are in keeping with recent efforts to contain risks and increase transparency in the state-owned enterprise (SOE) and local government sectors. PPP activity is likely to cool as a result of the new rules, suggesting there will be a further slowdown in infrastructure investment growth in 2018, says Fitch Ratings.

Aussie Bank Profitability to Come Back Under Pressure

Australian banks' profit growth is likely to slow in 2018 as global monetary tightening pushes up funding costs, loan-impairment charges rise, and tighter regulation has an impact on business volumes and compliance costs. Fitch Ratings maintains its negative sector outlook to reflect these pressures.

Reinsurance Renewals Suggest Flattened Underwriting Cycle

The reinsurance underwriting cycle may finally have turned, but price rises look modest, suggesting that the cycle may have become flatter. As we forecast in 4Q17, rates for property catastrophe reinsurance increased at 1 January 2018, according to recent reports from brokers - the first rise since 2013. But despite large catastrophe losses in 2017, the rate increases were modest.

Angola FX Move Signals Policy Shift, but Lacks Clarity

Recent decisions by the Angolan authorities, including the shift to a more flexible exchange rate mechanism, signal an accelerated and potentially more effective economic policy adjustment. However, the lack of clarity over how some of the measures will be implemented may limit their effectiveness, and the adjustment carries execution risk. 

Swiss Inflation Ticking Up but SNB Will Stay Expansionary

The rise in Swiss inflation is unlikely to prompt a significant change in the Swiss National Bank's (SNB) monetary policy stance this year. The SNB is unlikely to hike policy rates before the ECB does, as the SNB seeks to avoid franc appreciation. This stance supports growth but could potentially increase risks in the domestic banking system. 

China's Regulatory Clampdown May Lower G-SIB Scores

The rise in Chinese banks' global systemically important bank (G-SIB) scores in the previous few years in large part reflects their continued burgeoning size, but increased interbank activity has also raised their interconnectedness, while greater exposure to entrusted investment has added to their complexity.

Fitch Hosts 2018 Credit Outlook Conferences

Commenting on Fitch's overall global sovereign and macro view of the world, James McCormack, Global Head of Sovereign Ratings at Fitch said: "We see a world of higher interest rates starting to take hold this year and expect the Fed to raise rates four times in 2018, but fiscal pressures on more indebted sovereigns will not be evident until 2019 and beyond, when longer-term market rates respond to short-term policy rates.

2018 outlook

Global Corporate Overview

Global Head of Corporates, Richard Hunter says: "US tax reform is good news for shareholders in 2018, but we see limited upside for bondholders.Europe for its part is putting the recent financial crisis further in its rear view mirror, and Brexit is unlikely to slow that recovery". More Global 2018 Credit Outlooks

China in Focus

Latest: Hong Kong Insurers' Capital Strength Better Echoed by New Regime

Global Economic Outlook

World Growth to Remain Strong in 2018; Reality Checks Await Beyond

Global growth momentum remains strong and is likely to be sustained by an increasingly positive outlook for investment. World growth is now estimated at 3.2% this year and indications are that 2018 will be equally robust with growth to edge up to 3.3% next year. More Global 2018 Credit Outlooks

India's Recapitalisation to Prioritise Large State Banks

The first tranche of the Indian government's bank recapitalisation programme, approved by parliament last week, will increase the average core capital ratio of state banks, helping address shortages that weigh on banks' viability ratings and performance.

US States Facing Direct Hit to Revenues from Tax Changes

The Tax Cuts & Jobs Act (TCJA), signed into law on December 22, includes multiple changes to US federal tax provisions that could directly affect state revenues given the numerous linkages between state and federal tax codes.

Frontier Vision

Further Improvements in Frontier Market Growth

Several countries saw rising GDP growth in 3Q17, including Nigeria, Ghana, Tunisia, Senegal, Mongolia, Vietnam, Belarus, Paraguay, Bolivia and Jamaica, although economic activity slowed in Sri-Lanka, Ecuador, Georgia, Belize, Cote d'Ivoire and Kenya.

Global Rating Outlooks Most Positive Since Crisis

The prospect of rating upgrades outnumbering downgrades this year and next is higher than at any time since the financial crisis. But credit quality may start to weaken beyond this as ultra-supportive monetary policy is phased out and rising interest rates start to affect funding costs and asset quality. 

CEO Series: Fitch Ratings CEO Paul Taylor

Fitch Ratings CEO Paul Taylor is featured in this monthly video series from the Museum of American Finance. The series features 10 CEOs from across the financial industry discussing “Why Wall Street Matters” from their individual perspectives.