KUALA LUMPUR: Asia-Pacific’s credit conditions remain supportive, underpinned by economic resilience, constructive funding conditions and demand for artificial intelligence-linked technology, but its credit buffers are coming under increasing pressure, according to S&P Global Ratings.
The rating agency said energy disruptions, weaker currencies, potentially higher funding costs and fiscal strains were reducing the region’s margin for error.
“A longer energy or supply-chain disruption, renewed trade-policy volatility, softer Chinese demand, or a risk-off shift in capital flows could each be manageable in isolation,” S&P Global Ratings head of credit research for Asia-Pacific Eunice Tan said.
“Together, they could quickly weaken cash flows, restrict refinancing options, and expose a sharper divide between issuers with durable buffers and borrowers already operating close to their limits.”
In its Credit Conditions & Outlook Asia-Pacific Q4 2026 report, S&P said an energy supply disruption posed the most immediate operational risk, while a combination of vulnerabilities could amplify economic and credit pressures across sectors.
It said El Niño could add pressure through higher food prices and mobility disruptions, further contributing to inflation.
Meanwhile, strong demand for AI-related products is helping cushion tariff pressures on technology exporters, although S&P cautioned that the benefits are concentrated and costly to maintain.
“Although AI demand is cushioning tariff stresses for tech exporters, this powerful upside is concentrated and costly to defend.
“In China, export strength is masking domestic challenges, including a persistent real estate crisis that continues to erode household wealth, developer liquidity, local-government revenue, and confidence,” Tan said.
Meanwhile, the region's corporate, household and government tri-sector debt leverage remains elevated, underscoring sensitivity to persistent shocks.
S&P expects greater differentiation among borrowers, with issuers that have diversified supply chains, stronger liquidity, better data and cybersecurity controls, and credible adaptation plans better positioned to withstand potential pressures.
