ASIAN stock markets face a difficult 2008 and could slide sharply, ratings agency Standard & Poor's (S&P) said yesterday, as regional share prices fell heavily.
'Next year will be a more difficult one for stock-market returns and we would not rule out the risk of a sharp correction,' Asia-Pacific equity research head Lorraine Tan said in a statement.
Asian equity markets have reached increasingly risky levels and there will be less scope for them to rise after this year's strong performance, the report added.
'Markets would be jittery over potential negative news, such as on inflation and further deterioration in the US and European economies,' said Ms Tan.
The United States is struggling with a credit crunch and housing market slowdown, after record defaults on sub-prime mortgages extended to homebuyers with riskier credit profiles.
The report said markets in Hong Kong, South Korea and Thailand were likely to deliver better relative performances next year, but Japan is set to do less well.
S&P also expects more ratings downgrades for the corporate sector next year due to rising costs and less readily available credit.
Mr Ian Thompson, the firm's chief credit officer for regional ratings services, said casualties were expected, especially outside the financial sector.
'There may be more ratings downgrades than upgrades among Asia-Pacific companies next year'.
That contrasted sharply with the general improvement in credit quality this year, he said in the statement.
S&P expects South-east Asian economies to grow on average by 6.4 per cent next year, with Indonesia and the Philippines seen as bright spots.
- Straits Times Interactive, Friday Nov 9.