The Hindu Business Line : S&P moots under-weighting of Indian markets in 2007

Global credit rating agency Standard & Poor's in its "Asia-Pacific Markets Outlook 2007" report has recommended "under-weighting Indian and Japanese equity markets and over-weighting South Korea, Taiwan and China in 2007."

Further, the agency expects economic growth in Asia Pacific to exceed most other regions in 2007. A growth recovery in Japan, continuing momentum in China and India coupled with growing intra-regional trade, are expected to offset the impact of a slowdown in the US.

Higher financing costs, increased corporate borrowing and a frenzy of M&As (mergers and acquisitions) will fuel volatility in the Asia-Pacific financial markets adding to the risks faced by investors, according to a report released today by S&P. However, the markets are expected to remain generally strong in 2007.

The positive economic and market conditions that underpinned Asia-Pacific markets in 2006 will persist in 2007, despite the US economic slowdown. It would encourage greater corporate leverage, deepen the high-yield market and fuel an already over-heated M&A market.

"Although the trend is still broadly positive for the year ahead, there will be some negative credit stories too," said Mr Ian Thompson, Chief Criteria Officer for Standard & Poor's Ratings Services in Asia Pacific. Ms Lorraine Tan, Vice-President at Standard & Poor's Equity Research in Asia Pacific, said, "Corporate earnings should be supported by strong domestic consumption, but tighter liquidity will have a dampening effect on regional stock markets."

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