Singapore firms fear defaults from battered energy players in 2016

O&G firms are in a “precarious” position, says Moody’s.

Majority of companies in Singapore are bearish over the credit quality of energy and commodities firms across Asia, according to a report by Moody’s.

In a recent poll of Asian corporates, Moody’s revealed that 88% and 65% of respondents in Singapore and Hong Kong, respectively, were most worried about the commodities and energy sectors in terms of credit quality in 2016.

The polling result was consistent with Moody's view that rated Asian corporates with commodity exposure remain in a precarious position. Specifically, Moody's holds negative outlooks for Asia's coal and steel sectors.

Moody's also warned that the credit quality of corporates in general will worsen this year, on back of slow economic growth and capital flow volatility. The report said that corporate credit quality will decline in 2016 as it did in 2015, leading to further rating pressure and defaults.

As for Asian banks, asset quality and profitability will deteriorate as problem loans will continue to rise in most banking systems.

"Weak growth and commodity price declines will interact with foreign currency volatility to raise credit risk across the region," said Rahul Ghosh, a Moody's Vice President and Senior Research Analyst.