Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

McKinsey Sees ‘Ominous’ Signs of Another Asian Debt Crisis

Economy Aug 20, 2019 12:23AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- More than two decades since the Asia debt crisis gripped the region, global consulting firm McKinsey & Co. is warning that signs of a rerun are “ominous.”

Increased indebtedness, stresses in repaying borrowing, lender vulnerabilities and shadow banking practices are some of the concerns cited by McKinsey in an August report. Whether building pressures are “enough to trigger a new crisis remains to be seen” but governments and businesses need to monitor potential causes, authors Joydeep Sengupta and Archana Seshadrinathan wrote.

McKinsey’s warning shot comes as a slowing global economy puts pressure on earnings at Asian companies, and the U.S.-China trade war makes debt investors more risk adverse. Still, fund managers point to improved credit metrics of Asian dollar bond issuers in recent years, and Moody’s Investors Service said last week it expects most Asian economies can offset the domestic impact of the global slowdown through monetary and fiscal policy measures.

McKinsey examined the balance sheets of more than 23,000 companies across eleven Asia-Pacific countries, and found firms in most of Asia face “significant stress” in servicing debt obligations. In countries such as China and India, those pressures have risen since 2007, while falling sharply in the U.S. and U.K. during the same period, according to McKinsey.

The analysis looked at the share of long-term debt held by corporations with an interest coverage ratio of less than 1.5 times. At these levels, corporations are using a predominant share of their earnings to repay their debt, according to the study. In 2017, in China, India and Indonesia more than 25% of long-term debt was held by companies with a ratio of less than 1.5, it said.

Since 1997, financial regulators have put in place safeguards to prohibit a repeat of the crisis that engulfed Thailand, Korea, Indonesia and several other Asian nations and had long-lasting repercussions. Potential triggers of a crisis that need to be monitored include defaults in repayment of debt, liquidity mismatches, and large fluctuations in exchange rates, according to McKinsey.

McKinsey Sees ‘Ominous’ Signs of Another Asian Debt Crisis
 

Related Articles

Ireland boosts budget package to fight inflation
Ireland boosts budget package to fight inflation By Reuters - Jul 04, 2022 1

By Padraic Halpin DUBLIN (Reuters) - Ireland can increase its budget package for 2023 to help to fight soaring inflation, the finance ministry said on Monday after forecasting a...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email