Structural shifts to benefit Asian companies

SINGAPORE/NEW DELHI: The changes to industry dynamics and competitive landscapes resulting from the global recession will likely alter the profiles of key industry sectors to the benefit of Asian companies by 2012 and there would be more cross-border mergers and acquisitions over the next few years, says Fitch Ratings.

The credit rating agency in a report released today said certain industry sectors - notably automotive and technology - were already experiencing significant structural changes, and expected that this trend would become more pronounced by 2012.

Both the automotive and technology sectors have suffered demand-side weakness and would need to adapt to a new dynamic over the medium-term, Ficht Ratings said.

"Asian companies can be the net beneficiaries of these changes," reflecting the ability of established and emerging players to compete agressively across world markets, it added.

Besides, the agency expects an increasing level of cross-border merger and acquisition activity by Asia-Pacific corporations over the next few years, notably in the energy and commodities sector, as "China - in particular - seeks to secure natural resources necessary to support its continuing strong growth".

"Securing sufficient supplies of energy and raw materials is one of the biggest challenges facing high-growth economies and their leading industrial companies," it said.

Fitch Ratings said Asian companies are likely to lead the recovery as they emerge from the global recession with more resilience than their Western peers, and China and India would remain the world's growth engine.

"Asia-Pacific corporates are likely to emerge from the global recession with more resilience ... than their global peers, leading to a more rapid and robust recovery for the region's corporates," the rating agency said.

The key reasons cited by Fitch include manageable debt levels among Asian companies, an increasing ability to compete with established international players, and banking systems that are likely to continue financing the corporate universe.

"Looking ahead to 2012, in Fitch's view, the large emerging economies of Asia - namely China and India - will remain the world's growth engine, contributing an increasingly large share of GDP growth to the global economy," it said.

However, key medium-term challenges for Asian economies would be to increase the level of domestic consumption and reduce their reliance on exports and capacity investment to generate growth, Fitch said, adding it expected only limited progress in these by 2012.