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COMMENTS

COVID-19 Impact: Key Takeaways From Our Articles

COMMENTS

A Sudden Correction To Fast-Rising U.S. Home Prices Isn't Likely

COMMENTS

Corporate And Government Ratings That Exceed The Sovereign Rating

COMMENTS

Economic Outlook Emerging Markets Q1 2022: Recovery Isn't Yet Complete While COVID-19 And Inflation Risks Remain Front And Center

RESUPD

Research Update: Marlborough District Council Outlook Revised To Negative On Rising Projected Debt Burden; 'AA+/A-1+' Ratings Affirmed


COVID-19 Impact: Key Takeaways From Our Articles

(Editor's Note: This article has been updated from the previous edition.)

This week, our key takeaways from recent articles include the following: global credit outlook 2022, global economic outlook, credit conditions in Asia-Pacific, emerging markets, Europe and North America, as well as economic outlook of Asia-Pacific, Canada, emerging markets, EMEA emerging markets, eurozone, Latin America, the U.K. and the U.S. We dive into German companies, Indian banks, pension pressures for U.S. cities and Australian states. We also feature potential bond downgrades and the 'BBB' Pulse.

To date, S&P Global Ratings has published more than 1,470 articles that analyze the effects of COVID-19 on economic conditions and credit. We also periodically update this article, which contains an edited compilation of key takeaways from our most up-to-date series organized by sector, region/country, and publication date (see table 1).

S&P Global Ratings believes the new omicron variant is a stark reminder that the COVID-19 pandemic is far from over. Although already declared a variant of concern by the World Health Organization, uncertainty still surrounds its transmissibility, severity, and the effectiveness of existing vaccines against it. Early evidence points toward faster transmissibility, which has led many countries to close their borders with Southern Africa or reimpose international travel restrictions. Over coming weeks, we expect additional evidence and testing will show the extent of the danger it poses to enable us to make a more informed assessment of the risks to credit. Meanwhile, we expect the markets to take a precautionary stance and governments to put into place short-term containment measures. Nevertheless, we believe this shows that, once again, more coordinated, and decisive efforts are needed to vaccinate the world's population to prevent the emergence of new, more dangerous variants.

Webcast Series And Weekly Digest

S&P Global Ratings regularly hosts webinars to provide current data, perspectives, and analysis on the sectors, events, and trends that shape the global market. To register for the upcoming webinars, please click here.

We are also publishing a Ratings Weekly Digest, which spotlights key developments, economic and credit market updates, and asset class trends on a weekly basis. See the latest published Nov. 24 here.

Rating Actions

S&P Global Ratings is publishing a regularly updated list of rating actions it has taken globally. The latest edition is "Global Actions On Corporations, Sovereigns, International Public Finance, And Project Finance To Date In 2021," published Nov. 23, 2021.

"Credit FAQ: The Ratings Process And The COVID-19 Pandemic," published April 2, 2020, and "Top 10 Investor Questions On Our Ratings Process," published June 4, 2020, address some questions about the pandemic's effect on S&P Global Ratings and how our credit analysis and surveillance are proceeding during this time.

COVID-19 Infections

The number of COVID-19 confirmed cases has surpassed 262 million worldwide, with the death toll exceeding 5.2 million (see charts 1 and 2). The delta and omicron variants, together with complications related to vaccine rollouts threaten to undermine recovery prospects.

Chart 1

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Chart 2

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Key Takeaways From Our Relevant Published Reports

Global Credit Outlook

1. Global Credit Outlook 2022: Aftershocks, Future Shocks, And Transitions, Dec. 1, 2021

Alexandra Dimitrijevic, London, alexandra.dimitrijevic@spglobal.com, +44-20-7176-3128

  • Improving, but still vulnerable credit markets. We enter 2022 with largely positive credit momentum, reflecting favorable financing conditions and a powerful economic recovery. This could be derailed if persistently high inflation pushes central banks to aggressively tighten monetary policy, triggering significant market volatility and repricing risks. New COVID-19 variants could also undermine confidence and recovery prospects. The weakest areas of credit markets--often still highly sensitive to the ongoing impact of the pandemic--are most exposed, particularly highly leveraged corporates and some emerging markets.
  • Fewer downgrades and low default rates. Robust economic growth and largely favorable funding conditions point to a steady overall ratings performance in 2022 with fewer downgrades (6% global net negative bias) and low default rates (around 2.5%). Yet persistent supply chain disruptions and high input costs could weigh on growth and ratchet up the pressure on so-far resilient corporate margins. Inflationary pressures are clouding the outlook for EMs still battling with the pandemic. Leverage continues to build up in the riskiest parts of the credit markets, leaving them exposed to shifts in market sentiment, as illustrated by the recent developments affecting the Chinese real estate developers.
  • Risk of aftershocks from inflation and high global debt. The aftershocks of the COVID-19 pandemic pose significant risks. Persistent inflation, tied to supply chain disruptions and soaring energy prices, could trigger wage inflation and push major central banks, the Fed in particular, to hike rates sooner and faster. This could generate market volatility, likely amplified by elevated global debt levels. New variants could weaken the global economic recovery, as could China's policy and economic developments. Beyond COVID-19, credit markets face significant longer-term uncertainties around energy transition, cyber risk, and evolving financial systems in an increasingly digital economy.
Credit Conditions

2. Credit Conditions Asia-Pacific: China Slows, A Chill Wind Blows, Dec. 1, 2021

Eunice Tan, Hong Kong, + 852 2533-3553, eunice.tan@spglobal.com

  • Overall: COVID-19 trends and policy responses, contagion risk from Chinese property woes, and rising inflation expectations have introduced regional uncertainty.
  • New COVID variant: The omicron variant threatens the reimposition of mobility and travel restrictions, just as Asia-Pacific authorities are seeking to reopen their economies. Meanwhile, China and Hong Kong's zero-COVID policy underpins localized lockdowns and tight border restrictions. Still soft domestic consumption and dependence of exports points to uneven recovery patterns among geographies and industry sectors.
  • Inflation worries: While inflationary pressures remain controlled in the region, persistently high input prices could hike inflation expectations. This could propel demand for higher risk premiums. A disorderly reset of financial and real assets repricing could hit financing conditions for the region's borrowers, particularly highly leveraged ones.
  • China real estate woes: China's recent wave of property developer-related defaults point to mounting liquidity and funding challenges. Slower real estate sales, and recent enforcement of socioeconomic policies to promote "common prosperity" have increased uncertainty about the credit and growth trajectories of the country and individual borrowers. Consequently, we lowered China's GDP growth to 4.9% in 2022.
  • Credit outlook: Credit quality of the rated portfolio remains steady with a net rating outlook bias of negative 5%. However, the contagion fears from China's real estate crackdown and spillovers from above-mentioned risks cloud the outlook.

3. Credit Conditions Emerging Markets: Inflation, The Unwelcome Guest, Dec. 1, 2021

Jose M Perez-Gorozpe, Mexico City, (52) 55-5081-4442, jose.perez-gorozpe@spglobal.com

  • Overall: Risks are increasing for emerging markets (EMs) as inflation keeps accelerating in many key countries, adding to existing challenges. On the bright side, higher prices are partly fueled by the strong economic rebound. COVID-19's economic impact is decreasing and vaccinations are progressing, but the recent emergence of the omicron variant threatens the positive momentum.
  • Risks: Risk for an extended period of high inflation and lingering high prices has risen for many EMs. Rising prices could also prompt a faster-than-expected normalization of Fed interest rates, possibly leading to tighter financing conditions and market volatility. China's shifting policy stance and real estate woes could depress growth, which could spill over to EMs' key trade partners. A resurgence of COVID-19 cases could hit hard, since vaccination rates remain low in many EMs.
  • Credit: The negative rating bias (the percentage of ratings with negative outlooks or on CreditWatch negative) has stabilized across most EMs but remains high in emerging Asian markets, where the pandemic's effects are still weighing on issuers' credit quality amid worsening financing conditions.

4. Credit Conditions Europe: Reining In As Full Recovery Nears, Dec. 1, 2021

Paul Watters, CFA, London, paul.watters@spglobal.com, +44-20-7176-3542

  • Overall: Strong demand and falling unemployment create a fundamentally positive outlook for credit in 2022, although cost pressures, monetary policy tightening, and Europe's fourth COVID-19 wave, now compounded by omicron, are headwinds to monitor.
  • Risks: Broadening cost pressures accelerating the pace of tightening and vulnerability from the further accumulation of debt are our two top European risks. We see elevated risks around building and maintaining immunity to COVID; accelerating the transition to a low carbon economy; and protecting vital digital infrastructure from cyber attacks.
  • Credit: Financing conditions and credit trends remain supportive, tempered by growing shareholder-friendly activity and a still high proportion of 'B-/CCC' corporate ratings.

5. Credit Conditions North America: As Recovery Rolls On, Inflation Risks Remain, Dec. 1, 2021

David C Tesher, New York, (1) 212-438-2618, david.tesher@spglobal.com

  • Overall: Credit conditions remain largely favorable, although risks are looming—primarily those around inflation pressures and supply disruptions (including labor shortages) that many borrowers face. The potential for coronavirus variants such as omicron adds another layer of uncertainty about the pandemic and its effects on the economy and credit.
  • Credit: The North American net negative outlook bias among corporate borrowers has narrowed to just 5%, the lowest since December 2014. In this light, we see the U.S. trailing-12-month speculative-grade default rate reaching 2.5% by September of next year.
  • Risks: With inflation running "stronger and longer," the potential for central bank policy missteps has increased. As price pressures combine with supply constraints, investors could soon demand higher returns for the risks they're assuming. This could result in the repricing of financial and real assets, higher debt-servicing costs, and tighter financing conditions.
Autos

6. China's Auto Recovery Is Hitting A Speed Bump, Oct. 19, 2021

Claire Yuan, Hong Kong, + 852 2533 3542, Claire.Yuan@spglobal.com

  • China's monthly auto production and sales have been declining (year-on-year) since May, off a high base, mainly due to supply chain disruptions.
  • We believe demand remains healthy, as shown by a sales-to-production ratio of over 100%, declining dealer inventories, narrowing discounts, and surging used car sales.
  • With auto-chip shortages continuing, we now anticipate China's light vehicle (LV) sales to grow by 1%-3% in 2021, compared with our prior assumption of 5%-9% growth, and down from the 9.0% growth seen in the first nine months.
  • We expect a 3%-5% growth next year, slightly improved from our prior 2%-4% estimate, on deferred demand and a gradual easing of chip shortages.

7. Global Auto Sales Forecasts: Supply Disruption Slows Recovery, Oct. 19, 2021

Vittoria Ferraris, Milan, + 390272111207, vittoria.ferraris@spglobal.com

  • The intensifying semiconductor shortage has led us to revise downward our projections of a global light vehicle sales recovery to 2%-4% this year and 4%-6% in 2022.
  • We currently don't expect the supply-chain disruptions will affect ratings on global auto manufacturers, but there could be a credit impact for auto suppliers, particularly those at the lower end of the rating scale.
  • Despite a slower sales recovery overall, we project electrification will accelerate, with electric vehicles making up 7%-10% of the global light vehicle fleet in 2021 and to 15%-20% in 2025.

8. U.S. Auto Sales Forecast Lowered For 2021, With A Bumpy Road In 2022; EVs Gear Up To Expand Share, Oct. 14, 2021

Nishit K Madlani, New York, + 1 (212) 438 4070, nishit.madlani@spglobal.com

  • We expect U.S. light vehicle sales to rise 9% year over year to 15.8 million in 2021 (revised downward from our prior forecast of 16.7 million), with a gradual recovery toward 16.8 million in 2022-2023.
  • The negative bias in our rating outlooks for the automotive sector (the share of issuers with negative outlooks or ratings on CreditWatch with negative implications) is under 50% from over 80% at the peak of the COVID-19 pandemic in April 2020.
  • We expect used vehicle prices will remain flat to slightly up in 2022 with a modest decline in 2023 after persistent upside in 2020 and 2021 due to strong demand and weak supply.
  • Electric and plug-in hybrid vehicles' combined market share continues to surpass expectations. We now expect the share to be over 4% for 2021 (compared to our prior expectation of 2%-3%) and above 15% by 2025 (compared to our prior forecast of 10%).
Aviation

9. COVID-19 And Inflation Are Clouding European Airlines' Recovery Path, Nov. 11, 2021

Izabela Listowska, Frankfurt, + 49 693 399 9127, izabela.listowska@spglobal.com

  • Air passenger traffic across Europe will hardly reach 35% of prepandemic levels, despite the surge in travel during the summer vacation period.
  • We expect air travel demand will accelerate in 2022 but return to normal only in 2024, as vaccination rates inch up, mobility constraints ease, and crucial long-haul routes (such as North America) reopen.
  • Airlines remain susceptible to changing pandemic-related restrictions amid uncertainty regarding the recovery of business and intercontinental air travel, so the way forward presents challenges.
  • Although, in our base case, we don't foresee local governments reimposing widespread lockdowns, the recent surge in COVID-19 cases is blurring the industry's prospects, as are potential setbacks stemming from elevated global energy prices and inflationary trends.
Chemicals

10. U.S. Chemical Companies' Post-Pandemic Rebound Has Sparked A Surge In M&A, Sept. 30, 2021

Edward J Hudson, New York, + 1 (212) 438 2764, edward.hudson@spglobal.com

  • M&A activity in the chemical sector has ramped up in 2021.
  • The chemical industry has largely bounced back both from an earnings and ratings perspective following the pandemic.
  • It appears that the M&A activity in the sector will continue for the rest of the year.
Commodities - Metal And Mining

11. S&P Global Ratings Metal Price Assumptions: Choppy Markets Drive Erratic Moves, Oct. 11, 2021

Donald Marleau, CFA, Toronto + 1 (416) 507 2526, donald.marleau@spglobal.com

  • Our price assumptions reflect the cross currents of unsteady market conditions for various metals.
  • Iron ore prices dropped more than 50% in eight weeks and are trending toward our assumption for 2022.
  • Aluminum prices remain around decade highs on smelter curtailments in China and disruptions in upstream bauxite and alumina supply.
  • Record prices and profits for metals producers are adding to several years of financial discipline and yielding moderate but widespread credit improvement--for now.
  • Some issuers have already telegraphed large cash payouts to shareholders from cash flow windfalls.
Commodities - Oil And Gas

12. S&P Global Ratings Revises Oil And Natural Gas Price Decks, Oct. 4, 2021

Thomas A Watters, New York, (1) 212-438-7818, thomas.watters@spglobal.com

  • We raised our Henry Hub and Title Transfer Facility TTF natural gas price assumptions for the remainder of 2021, 2022, and 2023. We also raised the 2023 Alberta Energy Co. (AECO) natural gas price.
  • We raised our West Texas Intermediate and Brent oil price assumptions for 2021, 2022, and 2023.
  • We added new price assumptions in 2024 for oil and natural gas.
  • The revisions likely won't result in wholesale upgrades, though we could raise some speculative-grade ratings. We remain focused on issuers' financial policies and commitment to improving their balance sheets through debt reduction, particularly for investment-grade companies.
Consumer Products

13. China Power Outages Add Dark Clouds To An Already Weakening Consumer Sector, Nov. 10, 2021

Sandy Lim, CFA, Hong Kong, + 852 2533 3578, sandy.lim@spglobal.com

  • The credit profiles of the China consumer sector companies we rate can mostly withstand the effects of periodic power outages. However, growing electricity costs and operation disruption further weigh on profitability as companies combat the sharp increase in input costs amid weaker consumer sentiment.
  • We forecast average EBITDA margin for our coverage to drop to about 7.7% in 2021, and further decline to 7.5% in 2022, as compared to the pre-COVID level of 9.1% in 2019.
  • At a subsector level, power outages have varying credit implications. The hardest hit are manufacturers of consumer products. Restaurants are the next most affected, followed by offline retailers, and then online retailers.

14. European Retailers And Consumer Product Companies Will Show Resilience Against Rising Costs, Nov. 22, 2021

Raam Ratnam, CFA, CPA, London, + 44 20 7176 7462, raam.ratnam@spglobal.com

  • While the COVID-19 pandemic is not yet behind us, vaccination progress in developed economies and strong household disposable incomes have created fertile ground for a strong recovery in retail sales.
  • European consumer product and retail companies have to contend with a plethora of cost headwinds and logistical challenges as they look to reap the benefits of recovery during the forthcoming key festive trading season.
  • To cope with inflationary pressures, these companies have several tools at their disposal. These include offsetting cost efficiencies, the modification of supplier orders and product ranges, selective and differentiated price increases, product rationalization and reconfiguration, and the launches of new, innovative products at premium price points.

15. Some U.S. Consumer Products Companies Could Fail The Inflation Stress Test, Sept. 28, 2021

Sarah E Wyeth, New York, + 1 (212) 438 5658, sarah.wyeth@spglobal.com

  • Supply chain constraints, labor shortages, the delta variant, and rising commodity prices are clouding the outlook for the U.S. consumer products industry road to recovery.
  • We expect the sector to feel heightened inflationary pressure but don't believe it will spiral out of control, with relief coming within the next 12-18 months.
  • However, based on our stress test results, inflation beyond our base case would have a negative impact on credit quality, with speculative-grade issuers facing the most risk.
Corporates

16. China's Contagion Risks Rise: Turbulence, Impact, And Transmission Channels, Nov. 10, 2021

Charles Chang, Hong Kong, (852) 2533-3543, charles.chang@spglobal.com

Credit market contagion:

  • China will continue to drag on Asia's new-issue market, as tightening polices are unlikely to be reversed over the near term.
  • 2021 has seen significant issuer events, which have hit investor sentiment and will amplify volatility.
  • This is exacerbated by exposure that grew under COVID, when China made up two-thirds of speculative-grade issuance, and about 60% of investment-grade issuance.
  • New-issue allocation data suggest U.S./EMEA-based investors may have less exposure to Chinese property debt.
  • Credit market contagion has been mostly in 'B' category issuers in China, leaving property market contagion as the key risk.

Property market contagion:

  • COVID stimulus indirectly drove home prices to accelerate. The government needs to reverse price and sales momentum.
  • Fragmentation limits effect of individual defaults; Evergrande makes up 4% of overall sales, 1.4% of GFA under construction.
  • However, the recent sales drop shows default headlines can hit buyer sentiment and spread contagion to the broader market.
  • We expect sales to fall 10% in 2022, 5%-10% in 2023, with an up-to 3% fall in home prices.
  • Higher reliance on residential land sales may lead to contagion to local governments as land prices decelerate.

17. China's Zero-COVID Approach To Aggravate Rising Corporate Risks, Sept. 6, 2021

Chang Li, Beijing, + 86 10 6569 2705, chang.li@spglobal.com

  • COVID's global resurgence and China's zero-tolerance approach may further strain corporates if outbreaks continue to bring mobility restrictions and broad disruptions.
  • These episodes add burdens to Chinese corporates, which are already showing weakening credit trends.
  • Issuers in the country face higher leverage, weaker cash flows, tighter liquidity, and volatile financing conditions amid unprecedented distress events and regulatory risks..

18. One-Third Of German Companies Are Behind On New 2045 Net-Zero Deadline, Nov. 29, 2021

Tobias Mock, CFA, Frankfurt, + 49 693 399 9126, tobias.mock@spglobal.com

  • Germany's tighter deadline for achieving net-zero emissions by 2045 instead of 2050, implemented through an amendment to its Climate Change Act in August, has put industries on notice.
  • Of the 35 largest corporates we rate in the Germany, the top five emitters account for about 80% of scope 1+2 emissions in our data set, and 35% do not yet have a net-zero target in place, which validates the government's more aggressive timeline.
  • Although stepping up efforts to reduce greenhouse gases comes with a hefty price tag, German businesses could gain a competitive advantage over the long term in a market where most will need to innovate or reflect the additional costs in their products and services.

19. Supply Chain Strains and Rising Costs Will Pressure Profitability in 2022, Nov. 18, 2021

Gareth Williams, London, gareth.williams@spglobal.com, +44-20-7176-7226

  • Global nonfinancial corporates appear to be taking supply chain disruptions and soaring cost inflation in their stride. Our analysis suggests that in 54 out of 78 global sectors, most companies are finding it very easy or somewhat easy to pass on costs. Based on the last 12 months' results, EBITDA margins look set to hit a new high in 2021.
  • Cost increases have been absorbed or negated in a variety of ways – demand offsets, demand shifts, product mix adjustments, hedging, indexation, positive operational gearing, cost pass-throughs, and keeping pay growth low.
  • In our view, profit margin pressure will start to ratchet up in 2022. Our analysts expect supply disruption will persist until the end of 2022 for more than half of all sectors. Pay barely above 2019 levels is unlikely to be sustainable amid strong growth and rising costs, and signs of upward pay pressure are particularly apparent in North America.

20. Japan Corporate Credit Spotlight: Fragile Stability Faces Three Threats, Oct. 21, 2021

Makiko Yoshimura, Tokyo, +81-3-4550-8368, makiko.yoshimura@spglobal.com

  • The credit quality of Japan's corporate sector stopped deteriorating in fiscal 2020 and will stabilize thanks to cost reductions and a global economic recovery.
  • We focus on three factors that could worsen credit quality: the pandemic, supply chains, and aggressive growth investments.
  • ESG factors will have more influence on credit quality.

21. Global Recovery And High-Tech Demand Lift Taiwan Corporate Profitability To New Highs, Sept. 6, 2021

Raymond Hsu, CFA, Taipei, +886-2-2175-6827, raymond.hsu@spglobal.com

  • Credit strength has improved moderately among Taiwan's top 50 corporates over the past year, amid growing export demand.
  • Growth in e-commerce, remote working and schooling, digital transformation, and swift economic recovery in developed markets underpin export growth.
  • Profitability and cash flow could remain strong over 2021-2022, which could largely offset rising capex and cash dividends and support relatively stable debt leverage.
  • Tech firms will see continued revenue and profit growth in 2022, amid strong business and education demand for electronics, rising orders for Taiwan manufacturers as a result of the U.S.-China tech war, and growing investment in 5G products and cloud computing.
  • Non-tech companies could also see their performance remain above mid-cycle levels in to 2022, albeit slowing from the peak in 2021.
  • Container shipping and display panel companies have materially improved their capital structures, but weak market positions and high business volatility remain.
  • Increasing mergers and acquisitions are unlikely to weaken debt leverage materially, given largely prudent debt appetites among the top 50 corporates.
Credit Trends And Market Liquidity

22. The European Speculative-Grade Corporate Default Rate Could Reach 2.5% By September 2022, Nov. 18, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • We expect the European trailing-12-month speculative-grade corporate default rate to hit 2.5% by September 2022, from 3.3% in September 2021. In this baseline forecast, 20 speculative-grade companies would default.
  • In our optimistic scenario, we expect the default rate to fall to 1.5% by September 2022 (12 defaults) and, in our pessimistic scenario, we expect the default rate to increase to 5% (39 defaults).
  • Nearly all indicators of future default point to a subdued default rate ahead: market liquidity remains ample, economic projections for 2022 remain robust, and credit momentum is largely positive, with fewer downgrades expected relative to a year ago as firms regain revenue.
  • That said, we recognize that risks are weighted to the downside. Inflation has been rising, disruptive COVID-19 variants are possible, there is potential for policy missteps while navigating the recovery, and we may see a sharp reversal in what could be an excessive search for yield. All of these could prove to be headwinds for a speculative-grade population with a still very weak rating distribution and high leverage for the weakest issuers.

23. European Corporate Credit Outlook Remains Robust, Nov. 10, 2021

Kirsten R Mccabe, Global Ratings Research, New York + 1 (212) 438 3196, kirsten.mccabe@spglobal.com

  • Upgrades among European financial and nonfinancial corporates outpaced downgrades for the second consecutive quarter in third-quarter 2021, the majority of which were speculative-grade nonfinancial corporate issuers.
  • Most of the upgrades were among speculative-grade and nonfinancial corporate issuers in the chemicals, packaging, and environmental services sector.
  • There were just 13 downgrades among European corporate issuers--a historical low not seen in over a decade since there were 11 downgrades in third-quarter 2010.
  • The net ratings bias further declined to 10.3% in September 2021 from 14.7% in June. While transportation had the highest downgrade potential, automotive reported the highest positive bias.

24. Potential Downgrades Fall While Potential Upgrades Stall, Nov. 30, 2021

Sarah Limbach, Paris, + 33 14 420 6708, Sarah.Limbach@spglobal.com

  • The gap between potential downgrades and potential upgrades is at the lowest level since September 2018, and the number of potential downgrades is down 55% year to date.
  • The number of potential upgrades has slowed, with eight additions in October, sharply lower than the year-to-date monthly average of 17.
  • More than 30% of the new additions to the potential downgrades are from the utilities sector, but the greater downgrade risk remains in the media and entertainment sector.

25. 'BBB' Pulse: The Future Looks Bright As Potential Rising Stars Shoot Up, Nov. 24, 2021

Vincent R Conti, Singapore, + 65 6216 1188, vincent.conti@spglobal.com

  • Rising stars are outpacing fallen angels in 2021, with a net increase of four in October.
  • The gap between potential fallen angels and potential rising stars has fallen to the lowest level since February 2018.
  • At 37 potential rising stars, the total is the highest since April 2007. Excluding one issuer whose subsidiaries account for 11 of the total, it is still the highest in over two years.
  • Potential fallen angels stayed relatively flat in October, with media and entertainment still the largest contributor.

26. Two Defaults Brings The Corporate Tally To 67, Nov. 18, 2021

Nicole Serino, New York, (1) (212) 438 1396, nicole.serino@spglobal.com

  • The 2021 global corporate default tally increased to 67 following the defaults of Brazil-based transportation infrastructure group Investimentos e Participações em Infraestrutura S.A.-INVEPAR and California-based technology company Riverbed Parent, Inc.
  • With these defaults, the U.S. and emerging market region default tallies increased to 37 and 14--both tallies substantially lower than at this point in 2020 which had 146 and 28 defaults, respectively.
  • Global defaults have declined by 67% in 2021 from pandemic-related peaks of 2020.
  • The consumer products and media and entertainment sectors continue to lead the 2021 default tally with nine defaults each.
  • Defaults related to distressed exchanges have accounted for most of the defaults so far in 2021.
  • The U.S. trailing-12-month speculative-grade corporate default rate is expected to reach 2.5% by September 2022 from 2.4% in September 2021.

27. Global Financing Conditions: Bond Issuance Is Expected To Finish The Year Close To 2020 Levels; Drop 2% Next Year, Oct. 25, 2021

Nick W Kraemer, FRM, New York + 1 (212) 438 1698; nick.kraemer@spglobal.com

  • With financing conditions still favorable across all asset classes, issuance totals in 2021 have remained strong. We expect the full year to finish roughly on par with 2020, though the composition between sectors will vary.
  • Although we are forecasting a drop in issuance for 2022, it is still roughly in line with long-term trends in many sectors, rather than a marked "correction" from heady 2020 and 2021 levels.
  • Some challenges for global bond issuance in 2022 include our belief that rates will rise across most asset classes, a likely reduction in the global corporate mergers and acquisitions (M&A) pipeline, China's continued efforts to reduce debt reliance, and a return to trend for economic growth.
  • Other uncertainties remain, such as potential infrastructure and tax reform in the U.S., the future course of energy prices, and the retirement of LIBOR. Depending on the ultimate course and extent of these uncertainties, impacts on market sentiment and bond issuance could be mixed.

28. Signs Of Weakness Among Lowest-Rated Homebuilder And Real Estate Issuers, Oct. 29, 2021

Nicole Serino, New York, (1) (212) 438 1396, nicole.serino@spglobal.com

  • The global weakest links tally declined by 18 since our last report, to 242, the lowest tally since August 2019.
  • Although the 'B- and below' population remains at a high, the negative bias for issuers rated 'B-' and below has fallen to a record low of 25%, contributing to the drop in the weakest links tally.
  • The greatest number of additions to this month's tally was from homebuilders and real estate companies (two), followed by one each from five other sectors.
  • Regionally, the U.S. has driven much of the rating stabilization, while the Europe and Asia Pacific regions remains at higher-than-average levels of weakest links.

29. Why 'CCC' Rated Companies Have Risen And Default Rates Have Not, Oct. 19, 2021

Nicole Serino, New York, + 1 (212) 438 1396, nicole.serino@spglobal.com

  • Only 16% of 'CCC' rated issuers defaulted over the last 12 months compared with a historical average of 35%.
  • The severe impact of the pandemic caused downgrades of companies with relatively stronger businesses compared with those downgraded pre-pandemic, which means their recovery prospects may be greater as restrictions are lifted.
  • Upgrades out of the 'CCC' category historically take longer in the years following a major crisis as sustainability of credit metrics improvement needs to be proven.
  • However, default rates could pick up in 2022 if growth and deleveraging prospects stall and key lifelines such as unprecedented policy support and accommodating debt capital markets--essential for the weakest companies--disappear.

30. 2020 Annual Global Financial Services Default And Rating Transition Study, Sept. 14, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • Financial services defaults fell to five globally in 2020, reaching a six-year low as fiscal and monetary stimulus helped to limit the economic damage of the COVID-19 pandemic.
  • The default rate for financial services fell to 0.23% in 2020 (down from 0.42% in 2019), considerably lower than the 3.8% default rate for nonfinancial companies.
  • As all financial services defaults were from issuers rated 'B' or below at the start of 2020, the one-year Gini ratio for financial services remained above 90% for the ninth consecutive year.
  • Financial services upgrades fell to an all-time low of 1.77% in 2020, while the share of issuers downgraded increased to 10.6%, nearing its long-term average.

31. Risky Credits: The Percentage Of Issuers Rated 'CCC' And Below In Europe Is Above North America For The First Time, Nov. 8, 2021

Nicole Serino, New York, + 1 (212) 438 1396, nicole.serino@spglobal.com

  • The recovery of 'CCC' rated issuers in Europe remained stagnant in the third quarter as the number of upgrades out of the 'CCC' rating category slowed compared to the second quarter.
  • European 'CCC' and below debt outstanding topped US$100 billion equivalent for the first time in September with the downgrade of Ireland-based Endo International PLC to the 'CCC' rating category from 'B-'.
  • French issuers contributed the largest portion of speculative-grade debt outstanding with a negative outlook or CreditWatch placement with negative implications, with nearly US$50 billion.
  • Although upgrades are slowing, positive bias among the 'CCC' rated issuers increased through September, signaling the possibility of positive rating momentum in the near term.

32. Distressed Debt Amount Falls By Over 70%, Nov. 12, 2021

Nicole Serino, New York, + 1 (212) 438 1396, nicole.serino@spglobal.com

  • The U.S. distress ratio fell to 2.3%--tied with its lowest level since 2007--from 2.6%.
  • The amount of distressed debt has decreased by over 70% since October 2020, with the oil and gas sector the largest contributor to this decline.
  • Secondary market spreads across lower rating categories ('B' and 'CCC') narrowed marginally in October (as of Oct. 21) to 373 basis points (bps) and 589 bps from 385 bps and 598 bps in the previous month.
  • Despite the downward trends, the amount of debt rated 'B-' and below remains very high, as inflation and supply chain disruptions pose a challenge to operating performance in certain sectors.

33. The U.S. Speculative-Grade Corporate Default Rate Could Reach 2.5% By September 2022, Nov. 16, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • Despite growing risks, we expect the U.S. trailing-12-month speculative-grade corporate default rate to reach 2.5% by September 2022 from 2.4% in September 2021. To reach this baseline forecast, 44 speculative-grade companies would need to default.
  • In our optimistic scenario, we expect the default rate to fall to 1.5% by September 2022 (30 defaults), and in our pessimistic scenario, we expect the default rate to expand to 5.5% (109 defaults).
  • Almost all near-term indicators of future defaults suggest a lower default rate ahead, with credit metrics stabilizing, continued favorable lending conditions, over $1 trillion in speculative-grade issuance this year, and a strong economic rebound expected next year.
  • However, a growing list of risks could push a still weak rating distribution to produce more defaults: persistent inflation, possible policy missteps, a very high proportion of covenant-lite loans, and potential COVID-19 mutations are some of the growing risks that could lead to more defaults ahead.

34. U.S. Corporate Credit Recovery Remains An Uphill Climb, Oct. 28, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • U.S. corporate upgrades surpassed the prior one-year record in 2021 as credit quality continued its incremental recovery from last year.
  • Third-quarter downgrades fell to 47 (from 51)--the lowest quarterly total since 1997.
  • However, ratings still have an uphill climb to recover from the downgrades in 2020, as net upgrades in 2021 still only equal about one-fifth of 2020 net downgrades.
  • The negative bias fell by four percentage points for U.S. companies in the third quarter as downgrade risk declined across most sectors.

35. The Economic Impact Of Default Is Falling As Selective Defaults Rise, Sept. 16, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • Among the various types of default, selective defaults have grown more popular in both the U.S. and Europe since the global financial crisis.
  • Many of these are distressed exchanges, which tend to have a default rate that slightly lags that of other types of default during periods of heightened credit stress--by up to six months.
  • We have found that distressed exchanges in the U.S. typically see much higher ultimate discounted recovery rates than bankruptcies. This, combined with a growing percentage of distressed exchanges to total defaults, has led to lower economic losses from default over time, in aggregate.
  • In addition to persistently low interest rates, if aggregate losses from default are falling over time, this could be contributing to increased risk appetite among investors in recent years.

36. Growing Risks, Diminishing Rewards--Has The U.S. Speculative-Grade Market Hit A Peak?, Sept. 9, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • The current speculative-grade corporate credit market carries high risk combined with a very low payoff for investors.
  • The speculative-grade ratings distribution is historically weak, with just under 40% of all spec-grade issuers rated 'B-' or lower.
  • A recent rise in inflation led real corporate yields to turn negative for the first time ever in April, and even 'B' real yields fell below zero in June.
  • If inflation remains higher than expected and keeps real yields low, it may push investors out of this market, retracting the historically high liquidity for speculative-grade issuers now available.

37. No Time For Complacency For The U.S. Speculative-Grade Market, Sept. 2, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • We forecast the U.S. speculative-grade default rate will fall to 2.5% by June 2022 as the economic recovery builds steam, vaccine rollouts remain strong, credit quality stabilizes, and markets remain receptive to speculative-grade debt in their search for yield.
  • That said, receptive markets during economic lockdowns in 2020 have contributed to higher leverage and a larger proportion of issuers rated 'B-' and lower than at any time in history. This could produce a higher default rate over the longer term and, based on historical experience, implies a higher default rate than our current projection.
  • Along with a large number of downgrades in 2020, the 'B-' and lower-rated population has grown through a surge in new issuers rated at this low level.
Cross-Sector

38. COVID, China Risks Won't Pass For Years, Say Panelists, Sept. 8, 2021

Charles Chang, Hong Kong, (852) 2533-3543, charles.chang@spglobal.com

  • Investors are bracing for more idiosyncratic and regulatory events in Asia on growing recognition that COVID and China risks are lasting rather than transitory, according to panelists at our recent webcast.
  • Lower credit ratings, higher debt levels, and higher default rates will push winners and losers to emerge over many years to come.
  • Government decisions on which state-owned enterprises to support, along with rising maturity walls and working capital needs, will be key determinants of which firms default.
  • Green bond issuance should continue to boom, but green-labelling is a key challenge. Firms just paying lip service to ESG compliance will see higher financing costs.

39. Sector Roundup Asia-Pacific Q4 2021: Improved Rating Trend Likely To Wane, Sept. 28, 2021

Terry E Chan, CFA, Melbourne, + 61-3-9631-2174, terry.chan@spglobal.com

  • Negative rating bias. Our net ratings bias has improved to negative 7% (previous quarter: negative 11%), its best level since the COVID-19 crisis broke. However, this momentum is unlikely to continue into the fourth quarter of 2021 given the slowing pace of economic recovery.
  • COVID-19 recurrence. Despite higher vaccination coverage across Asia-Pacific, COVID outbreaks have resurged. Continuing or further lockdowns and social distancing restrictions would further drag on the rate of recovery. This could also disrupt supply chains, from upstream semiconductor chips assembling in countries such as Malaysia, to downstream chip-users such as the auto, consumer product, retail, and tech sectors.
  • China's policy shifts. The country's toughening socioeconomic policy has heightened uncertainty over the trajectories of credit and GDP growth in China. This may have consequences for the business models of domestic sectors with spillover effects to issuers outside the country dependent on China for exports or supplies.

40. Global Debt Leverage: Can China Escape Its Corporate Debt Trap?, Oct. 19, 2021

Terence Chan, CFA, Melbourne, +61-3-9631-2174, terry.chan@spglobal.com

  • Too big to ignore. China's corporate debt of US$27 trillion is equivalent to 31% of the global total, making it too big for investors to ignore. Its debt-to-GDP ratio of 159% is markedly higher than the global rate of 101% and twice the U.S.' 85%, implying substantial financial and economic contagion risk.
  • Policy trigger. The central government's decision to reduce financial risk in the economy, especially in speculative activities (for example, real estate), has triggered liquidity stress for highly leveraged corporates.
  • Three-fifths of Chinese entities are in the global quartile with the worst risk. We estimate, based on a 5,000-plus entity sample, that 58% of China's corporates are highly indebted (the global quartile with the highest credit risk). This is sharply above the global sample's 38%.
  • Half are in construction or property. 45% of the sampled China corporate debt is in construction and engineering, and real estate. Of this, we would categorize three-quarters as highly indebted.
  • No pain, no gain. With the Chinese government's resources, the corporate debt trap could be overcome--but not without pain for borrowers and lenders. In a "what-if" scenario where about 5% of existing debt is retired (amortized) annually, the debt-to-GDP ratio could ease to the global average by 2030.

41. Coal Crunch Won't Leave China's Power Firms In The Cold, Oct. 5, 2021

Apple Li, CPA, Hong Kong, + 852 2533 3512, apple.li@spglobal.com

  • The credit profiles of China utilities and commodities companies we rate can mostly handle the effects of ongoing power shortages.
  • Losses at the country's independent power producers should ease after government moves to boost coal supplies from both domestic and overseas sources. But coal prices are likely to fall only in the first half of 2022, after the upcoming winter heating period.
  • Before the coal crunch recedes, power shortages could impact industrial sectors in particular as the government pursues its energy and climate related targets. Overall, we expect to see growth in power consumption decelerate toward the end of 2021.
  • For steel, aluminum, and cement producers, lower volumes due to power shortages will likely support prices, in our view. Large industry players are more resistant to power supply disruptions than smaller companies, which face higher operational risks. This will likely accelerate consolidation in industries with overcapacity.
  • While we expect risks to ease after the coming winter period, unexpected negative events such as policy missteps may prolong the crisis and its effects.

42. Evergrande Default Contagion Risk--Ripple Or Wave?, Sept. 20, 2021

Matthew Chow, CFA, Hong Kong, + 852 2532 8046, matthew.chow@spglobal.com

  • Evergrande is scheduled to make a number of interest payments on its public debt starting on Sept. 23, 2021. A default is likely. Events could broadly rattle investors' confidence in China's property sector and for speculative-grade markets broadly, possibly diminishing funding access for unrelated names.
  • We don't expect government actions to help Evergrande unless systemic stability is at risk. A government bailout would undermine the campaign to instill greater financial discipline in the property sector. Government support to prevent a default is only likely if contagion risks cause other large developers to fail. This could threaten the stability of the financial system and economy. We think the hit to the financial system from Evergrande alone will be manageable.
  • Evergrande's difficulties are weighing on China's property market. This could have wide-reaching negative ramifications for other developers, suppliers and contractors, and the banks and financial institutions that lend to them. We expect the default risks of weaker, highly leveraged property developers to rise.
  • The Chinese banking sector can digest an Evergrande default with no significant disruption, although we will be mindful of potential knock-on effects. Evergrande is small relative to Chinese banks' total loans. The banking sector's direct exposure to Evergrande also appears well distributed.

43. Emerging Markets Monthly Highlights: Rising Yields Could Expose Pockets Of Funding Constraints, Nov. 10, 2021

Jose M Perez-Gorozpe, Mexico City, (52) 55-5081-4442, jose.perez-gorozpe@spglobal.com

  • We see risks from China's slower growth path and policy shifts, as China's economy transitions toward "common prosperity" and greater financial discipline.
  • Signs of credit weakness concentrated among Chinese real estate developers, but emerging market credit remails relatively stable outside the sector.
  • Rising inflation will continue to keep central banks on a tightening bias.
  • Financing conditions tightened in emerging markets in recent months, mostly due to the rising benchmark yields.

44. MENA Sovereigns, Corporates, And Banks Enter A New Chapter As COVID-19 Concerns Linger, Sept. 7, 2021

Jose M Perez-Gorozpe, Mexico City, (52) 55-5081-4442, jose.perez-gorozpe@spglobal.com

  • Key Middle East and North African (MENA) countries' greater reliance on energy exports and travel and tourism meant last year's regional economic loss closely tracked the world composite.
  • Hydrocarbon endowments are a key differential between Gulf Cooperation Council (GCC) and North African sovereigns.
  • S&P Global Ratings sees gradual recovery across most industries, but corporates remain cautious.
  • Most MENA banks have remained resilient despite the pandemic's economic shock.

45. Decarbonization Efforts Are Shaking Up Global Energy Markets, Sept. 28, 2021

Pierre Georges, Paris, + 33 14 420 6735, pierre.georges@spglobal.com

  • Major support policies for rapid decarbonization--such as "Fit For 55" in Europe and a potential $3.5 trillion U.S. clean energy framework proposed by President Biden--represent a significant investment opportunity for electric utilities.
  • However, recent inflation in the cost of renewables production could stall growth if it endures and challenges the 40% cost decline anticipated over the next decade. For 2021, S&P Global Platts Analytics forecasts a rise in costs of 10% for solar photovoltaic plants, 8% for onshore wind projects, and 4% for offshore wind projects.
  • We also see rising policy risk for power producers, given that energy affordability issues or blackout risks could materialize if the rollout of new renewables and power storage capacity isn't aligned with the decommissioning of coal and nuclear plants.
  • Oil and gas players will also contend with accelerating the transformation of their portfolio toward lower-carbon power sources.

46. Latin America Looks Past COVID-19 And Sees Political Uncertainty And Old Challenges, Oct. 21, 2021

Elijah Oliveros, New York, + 1 (212) 438 2228, elijah.oliveros@spglobal.com, + 1 (212) 438 2228

  • While COVID-19 isn't going away anytime soon, and lockdowns to prevent the spread of future variants are still on the cards, the pandemic's harsh impact on GDP is falling. Nevertheless, LatAm will continue to face the same structural economic challenges it did before the pandemic, including slow productivity growth resulting from low and inefficient investment.
  • The pandemic has created a difficult political and social legacy in the region that may constrain its long-term growth prospects and its sovereign ratings trajectory. The shortterm challenge in the region is to accelerate economic growth and job creation. However, LatAm is encountering a bigger obstacle in creating political support for new social and economic policies to address the weaknesses exposed by the pandemic.
  • On the bright side, LatAm banks and non-financial corporations are performing better than expected, thanks to governments' actions to cushion the pandemic's impact, a stronger-than-expected demand for essential consumer products and services, as well as the sharp rebound in commodity prices.
  • Key risks for the region remain persistently high. Along with potentially new COVID-19 variants, the region faces higher inflation, a likelihood of a faster normalization of U.S. monetary policy, China's shifting policy stance, and a heavy election cycle ahead that's raising political uncertainty.

47. Thailand Cross Practice Outlook: Downside Risks Remain High, Oct. 21, 2021

Deepali V Seth Chhabria, Mumbai, + 912233424186, deepali.seth@spglobal.com

  • Thailand's prolonged battle with COVID-19 will cause permanent losses for the economy, putting strain on banks. Policy flexibility and fiscal support is helping to mitigate the fallout.
  • The pandemic escalation has pushed back the likely timelines for greater normalization of domestic activity and a gradual resumption of tourism. We expect the permanent cost for Thailand to be high at around 10% of GDP, because of economy's reliance on tourism.
  • We expect banks will need to restructure more loans, especially retail loans, due to the fragile household debt situation. Banks will have to take losses on some of these long-term loan restructurings.
Economics

48. Asia-Pacific: Ghosts Of COVID Past Hover Over 2022, Nov. 29, 2021

Paul F Gruenwald, New York, + 1 (212) 437 1710, paul.gruenwald@spglobal.com

  • Asia Pacific continues to underperform the U.S. and Europe as lockdowns crimp domestic demand and generate overreliance on exports for growth; our macro forecasts over 2021-24 remain broadly unchanged from the previous quarter.
  • On the pandemic, some countries have begun to step away from the "zero-tolerance" approach that has held back growth (China is an exception), adding some momentum.
  • The region has largely escaped the inflation scare seen in other parts of the world, although central banks in Australia, Korea, and New Zealand are withdrawing accommodation. In contrast to their global peers, emerging market central banks are generally on hold.
  • China's moves toward more self-sufficiency, more financial discipline, and a larger role for the state may affect the country's productivity and trend growth, as may present spillover effects to the region.

49. How Will China's Evolving Economic Model And Energy Strategy Affect Trade With Central Asia?, Oct. 18, 2021

Valerijs Rezvijs, London, valerijs.rezvijs@spglobal.com

  • Over the past 15 years, China has become a key trade and investment partner for Central Asia, particularly through the rise in energy imports from the region.
  • China's transition to a consumption-led from an investment-led growth model and its new climate goals will likely change Central Asia's export dynamics.
  • We estimate that future exports to China from Central Asia's countries will rise less under a consumption-driven growth model than under an investment-led one, with a gap of 10%-15% between the two.
  • However, China's plan to achieve carbon neutrality by 2060 could increase its need to import gas from Central Asia, at least in the medium term.

50. Economic Outlook Canada Q1 2022: Economy Set To Expand Strongly, COVID-19 And Inflation Risks Remain, Nov. 29, 2021

Satyam Panday, New York, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • Despite the setback from third and fourth waves of COVID-19 in 2021, the Canadian economy is still on course to expand by a robust 5.0% in 2021, and 2022-2023 will likely bring another couple of years of above-potential growth.
  • There are numerous risks to our baseline growth forecast. The delta variant may not represent the virus' last assault and higher- and longer-than-expected inflation could derail the domestic demand from a robust growth path.
  • Our forecast is that consumer price inflation in Canada will peak this quarter and the next (on a year over year basis) before reverting in the second half of 2022 to its 2% average, in line with Bank of Canada's (BoC) target. We continue to see inflation as a specific feature of the pandemic crisis that will fade away along with pandemic disruption.
  • Given elevated inflation (above the BoC's target band) in the first quarter and our forecast of total employment recovering to full employment trend by the first quarter of 2022, we now anticipate the BoC will begin its rate hike cycle in April 2022 (versus market pricing of as early as January 2022 and BoC's "sometime in the middle quarters of 2022").

51. Canada And Its Provinces: GDP Growth Prospects In The Coming Decade, Sept. 14, 2021

Satyam Panday, New York, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • In running 1 million simulations by drawing on historical experience, we estimated that median annual real GDP growth rate for Canada over the next 10 years is 2.2%.
  • Real GDP growth at the national median does not fully explain what's driving growth at the regional level.
  • Government policies that influence the labor market matter, and can influence provincial fiscal outcomes.

52. Economic Outlook Emerging Markets Q1 2022: Recovery Isn't Yet Complete While COVID-19 And Inflation Risks Remain Front And Center, Nov. 30, 2021

Satyam Panday, New York, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • S&P Global Ratings lowered its 2022 real GDP growth forecast for emerging markets (EMs; excluding China and India) by 0.1 percentage point (ppt) to 3.5%, largely reflecting a 0.5 ppt downward revision to Latin America's growth. Forecasts for 2023 and 2024 remain broadly unchanged, averaging 3.1%.
  • Most economies in EMs should grow at above-trend rate in 2022, given that recovery from the COVID-related downturn isn't yet complete, and some sectors continue to operate below capacity.
  • Risks to our growth outlook are squarely on the downside and include a delayed exit from the pandemic, a deeper slowdown in China, and bumpy transition from recovery-related ultra-accommodative policies to generally tighter steady-state expansion policies.

53. Economic Outlook EMEA Emerging Markets Q1 2022 High Inflation And COVID-19 Threaten To Slow Recovery, Nov. 30, 2021

Tatiana Lysenko, Paris, +33-1-4420-6748, tatiana.lysenko@spglobal.com

  • By the end of the third quarter, all key emerging market (EM) economies within Europe, the Middle East, and Africa (EMEA) have achieved a meaningful recovery from the pandemic related downturn. The recovery is not yet complete, however, and some sectors continue to operate below capacity. While the pace of expansion is slowing, most economies should still see above-trend growth in 2022.
  • We now forecast higher inflation and higher interest rates in EM-EMEA economies. While we expect inflationary pressures to subside gradually, uncertainties about the domestic and global inflation outlook and the speed of U.S. monetary policy normalization will keep EMEA central banks on a tightening bias.
  • Turkey's macroeconomic trajectory is highly uncertain following interest rate cuts amid very high inflation and sharp lira depreciation, but we see limited effects from the developments in Turkey on other EMs.
  • Insufficient progress in COVID-19 vaccination remains a key risk to the outlook. The new Omicron variant is a stark reminder that the pandemic is far from over.

54. Caucasus And Central Asian Economies Look To Commodities And Domestic Demand To Emerge From The Pandemic, Nov. 11, 2021

Satyam Panday, New York, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • Key economies in the Caucasus and Central Asia are recovering on the back of strong commodities-led external demand and strengthening domestic demand as COVID-19- related restrictions are eased.
  • Caucasus and Central Asia sovereigns share key weaknesses, notably low economic wealth levels, weak institutional frameworks, and limitations on monetary policy flexibility.
  • The energy transition creates short-term opportunities and long-term risks for producers in Central Asia and the Caucasus.
  • We expect banking sectors in the Caucasus and Central Asia to continue recovering from pandemic-related stress, supported by the rebound in economic growth and gradual return of economic activities and social mobility.

55. Eurozone Economic Outlook 2022: A Look Inside The Recovery, Nov. 30, 2021

Sylvain Broyer, Frankfurt, + 49 693 399 9156, sylvain.broyer@spglobal.com

  • Will the new wave of COVID-19 infections derail the recovery? It may slow the recovery in consumption, especially for consumer-facing services. Therefore, we are maintaining our eurozone GDP forecast at 5.1% for this year and are lowering the 2022 outlook 0.1 percentage point to 4.4%, despite a surprisingly strong third-quarter uplift. That said, because the pandemic situation in Europe and elsewhere is fluid again, we see it as a risk to our macroeconomic baseline.
  • Will the eurozone continue to suffer from supply chain bottlenecks? These should ease gradually but extend well into next year. Germany has been the most exposed because of a larger industry and long supply chain. Thanks to more domestically oriented sectors and support packages, France and Italy are recovering more quickly than expected.
  • Which sectors are recovering the quickest? Employment and value creation have been stronger in information and communication and finance and real estate, while consumer-facing sectors still have some way to go, and bottlenecks are hindering industry.
  • Is above-target inflation here to stay? The rate should ease to about 2% next year, as the frictional mismatch between demand and supply eases and the end of tax breaks starts falling out of headline inflation. More structural drivers are set to lift consumer prices gradually only from the end of 2023.
  • Will the ECB tighten monetary policy as soon as next year? We think the ECB will wait until 2024 to hike rates. Yet, the central bank is likely to phase out net purchases under the PEPP in March 2022. Tapering the APP will probably not appear on the agenda before end-2023.

56. Green Spending Or Carbon Taxes (Or Both): How To Reach Climate Targets, And Grow Too, By 2030?, Nov. 4, 2021

Marion Amiot, London, + 44(0)2071760128, marion.amiot@spglobal.com

  • The U.S. and EU have added green spending of about 1.4% and 3.9% of 2019 GDP to their COVID-19 recovery plans. With fiscal multipliers of 1.4-1.6, this could add up to 2 percentage points to U.S. GDP and 6.6 points to EU GDP by 2030.
  • While environmental policies tend to have a small overall economic impact, the costs of the transition to green energy may become more material.
  • Our carbon tax scenario shows that a sharp rise in the price of carbon to $100 by 2030, as recommended by the High-Level Commission on Carbon Prices, would represent a more negative shock for economies with low carbon prices and reliance on carbon-intensive energy sources.
  • The impact on GDP, without offsetting measures, could be over 8% for China by 2030, and closer to 5% if tax revenues were reinvested by the government. It's less for the U.S. at 3% and Europe at 2%, and about 1% or less after reinvestment for both.
  • On the microeconomic level, less productive and smaller firms, higher emitters, and lower-income households are more vulnerable to costs from these and environmental policies--if they are not offset.
  • A carbon border adjustment mechanism may make sense for countries that have high domestic carbon prices but is likely to be viewed as a protectionist move otherwise. The European experience of low carbon prices between 2005 and 2011 also suggests no evidence of carbon leakage, so a CBAM would mainly make sense for energy-intensive and trade-exposed industries. That said, this might change as the carbon price has recently increased to €60 a ton in the EU.
  • Global private-sector investment in renewable energy has tripled to US$2.6 trillion in the last decade, with the U.S., EU, and China accounting for about two-thirds. Yet, green innovation and R&D intensities have stalled since 2012. That said, the recent rise in ESG interest among investors could buck this trend..

57. European Housing Market Inflation Is Here To Stay, Nov. 2, 2021

Marion Amiot, London, + 44(0)2071760128, marion.amiot@spglobal.com

  • European house prices are this year increasing at their fastest pace since 2006, by 6.9% annually in Q2 2021.
  • A large pool of household savings, a shortage of housing supply, and low borrowing costs are all contributing to dynamic property markets across Europe.
  • As supply of new housing is not able to keep pace with structurally high demand, we expect the rise in housing costs to continue over the over the next four years.
  • Despite this, as savings are absorbed and central banks start tightening their policy stance, housing price inflation is likely to start moderating to different degrees depending on country-specific factors.

58. Economic Outlook Q1 2022: Rising Inflation Fears Overshadow A Robust Rebound, Nov. 30, 2021

Paul F Gruenwald, New York, + 1 (212) 437 1710, paul.gruenwald@spglobal.com

  • The global economy is in the midst of a robust but uneven rebound from the pandemic, with demand growth outrunning supply growth and inflation rising quickly almost everywhere.
  • COVID-19 is still with us, but the economic impact of the virus is weakening, at least for now. The new omicron variant is a wildcard at this juncture.
  • On policy, central banks in key emerging markets are hiking rates, some aggressively; more recently, those in advanced countries are hiking as well, with the Fed and ECB still on hold.
  • Our GDP growth forecasts are broadly unchanged with the U.S. and eurozone hitting multi-decade highs; China has slowed to below 5% as the government prioritizes financial stability.
  • Persistent high inflation requiring an unanticipated policy adjustment is now the main macro risk for 2022. China's growth path remains our key risk for the next few years.

59. Economic Outlook Latin America Q1 2022: High Inflation And Labor Market Weakness Will Keep Risks Elevated In 2022, Nov. 29, 2021

Elijah Oliveros-Rosen, New York, + 1 (212) 438 2228, elijah.oliveros@spglobal.com

  • We lowered our 2022 GDP growth forecast for the six major Latin American economies by roughly half a percentage point--to 2% from 6.6% expected in 2021. This is mainly due to inflation being higher and less transitory than expected, which will translate into higher interest rates across the region.
  • Several factors will keep downside risks to growth particularly high in 2022. The combination of slow growth, high inflation, and still-weak labor market dynamics, amid a heavy electoral cycle, will increase demands for continued fiscal stimulus measures. This could add more upward pressure on interest rates to compensate for the associated higher fiscal risk premia and keep investment subdued.
  • Two countries stand out for having a higher risk of GDP deteriorating more than expected in 2022--Chile and Brazil. In Chile, domestic demand surged in 2021 due in large part to sizeable stimulus measures that are unlikely to be repeated in 2022. In Brazil, the ongoing aggressive tightening in monetary policy that will continue into 2022, partly due to weaker fiscal dynamics, threatens to take a large toll on domestic demand.
  • While details are beginning to emerge about the new Omicron variant of COVID-19, the associated uncertainty and potential for more widespread mobility restrictions also increase downside risk to our growth projections.

60. Economic Outlook U.K. Q1 2022: Onward And Upward, Nov. 30, 2021

Boris S Glass, London, + 44 20 7176 8420, boris.glass@spglobal.com

  • We forecast the U.K. economic recovery will continue at a high, but decelerating pace, with GDP expanding by 4.6% in 2022 after 6.9% this year. It should regain pre-pandemic levels in the first quarter of 2022.
  • We expect inflation to rise further in the next few months, averaging 4.5% in Q1 2022, but to remain transitory. We don't expect it to derail the recovery momentum, which remains supported by the gradual realization of pent-up demand, strong wage growth, and a large buffer of extra household savings.
  • To keep inflation expectations well anchored, we think the Bank of England will raise the policy rate to 0.5% next year, with hikes in February and May. However, after these early increases, we think the central bank will continue its path of cautious and gradual normalization.

61. Economic Outlook U.S. Q1 2022: Cruising At A Lower Altitude, Nov. 29, 2021

Beth Ann Bovino, New York, (1) 212-438-1652, bethann.bovino@spglobal.com

  • GDP growth: As supply-chain disruptions continue, we've lowered our U.S. GDP growth forecast to 5.5% for 2021 and 3.9% for 2022 (from 5.7% and 4.1%, respectively). Despite the slowdown, GDP is still likely to rise to a 37-year high in 2021, with solid readings for 2022, on continued economic demand from healthy balance sheets.
  • Supply chain: Supply-chain disruptions are the largest stumbling block for the U.S. economy. Although there are signs that supply-chain issues are easing, we expect price pressures to last well into 2022 and inflation to not reach the Fed's target until late 2023.
  • Labor force: Unemployed workers are getting jobs at a fast pace. However, the decline in labor force participation, particularly prime-age workers, is an issue for productivity and growth.
  • Unemployment: The unemployment rate, at 4.6%, is closer to pre-pandemic levels. When adjusted for the labor force exit, it is 6.4%. We expect the adjusted unemployment rate to reach its precrisis lows in first-quarter 2023.
  • The Fed: The Fed began tapering asset purchases late this year at $15 billion a month. We expect the Fed to reduce monthly purchases by a greater amount next year to reach zero three months earlier in 2022 than at the current "$15 billion" pace, with the first rate hike a little later that year. Inflation should reach the Fed's 2% target by late 2023.
  • Financial conditions: Financial conditions for households and nonfinancial corporations improved in the second quarter to a 10.5-year low, according to our Financial Fragility Index.
  • Downside scenario: Risks that could lead to a slower growth downside scenario include the Fed being forced to tighten faster than it currently expects, disorderly reflation, repricing risk, distribution of COVID-19 vaccines, new COVID-19 variants, and increasing trade tensions with China.
  • Upside scenario: A potential upside scenario would include a clearer path to additional stimulus and increased infrastructure spending.
  • Recession: We assess recession risk at 10%-15%.

62. Labor Force Exit Has The U.S. Economy In A Bind, Nov. 22, 2021

Beth Ann Bovino, New York, (1) 212-438-1652, bethann.bovino@spglobal.com

  • Lost productivity from the drop in labor force participation is limiting U.S. economic growth. While 2021 GDP growth will likely reach a 37-year high, we estimate it lost well over 1 percentage point because of extreme supply bottlenecks.
  • Prime-age workers (ages 25-54) account for 1.4 million, or 45%, of the 3 million people who exited the labor force--and their return is key to stabilizing the job market.
  • The labor force exit has added to business costs, increasing wage inflation dramatically. We expect pricing pressure to slowly ease later in 2022 but not reach the Fed's average 2.0% target until 2023. Once bond purchases reach zero in mid-2022, we expect the Fed's first interest rate hike to come in September 2022, though risks tilt to an even faster Fed response.
  • U.S. labor market conditions since the pandemic began highlight a possible structural shift in the labor force, with almost two-thirds of the missing workers having left the workforce entirely. We estimate that 42% of the drop in the labor force participation rate is due to structural shifts and 58% of the drop is for reasons that stem more directly from the pandemic and may be temporary.

63. U.S. Real-Time Data: Early Signs Indicate Supply-Side Pressures Are Easing, Nov. 15, 2021

Beth Ann Bovino, New York, (1) 212-438-1652, bethann.bovino@spglobal.com

  • Consumer prices have surged to a 30-year high on an annual basis as inflation expectations climb higher, hurting consumer confidence. While sequential consumer price index (CPI) inflation has moderated, and supply-side bottlenecks are starting to show signs of easing, these factors complicate the Fed's efforts to convince markets that the latest price increases are largely transitory.
  • We now expect the Fed to raise rates a little sooner than it currently indicates. We expect the federal funds rate to lift off in September 2022, a bit sooner than our previous prediction for a December 2022 hike.
  • After declining in recent weeks, new COVID-19 cases are holding steady at around 72,000 per day, much higher than the average of 11,500 in mid-June. Households therefore remain cautious when going out for dinners and trips.
  • Initial jobless claims dropped to 267,000 last week, the lowest level since the start of the pandemic. If the average weekly decline over the past three months continues, initial claims will return to their pre-pandemic level by the end of the year.
  • Indeed weekly job postings continued to climb to a new high and are almost 50% above the pre-pandemic baseline level, as the gap between job openings and hires widen.

64. Where Are The Workers? Three Explanations Point To An Answer, Nov. 4, 2021

Beth Ann Bovino, New York, (1) 212-438-1652, bethann.bovino@spglobal.com

  • Approximately five million people in the U.S. are unemployed or have left the workforce since the pandemic began, and it is difficult to predict whether their decision was short term or permanent.
  • It has been suggested that extended federal unemployment benefits offered during the pandemic have kept workers on the sidelines. Our analysis indicates this is not the case.
  • States that ended the extended benefits earlier than the September deadline also largely reopened their economies sooner, so the reopening effect helped these states boost employment even before those benefits ended.
  • The reason workers aren't filling jobs today seems to stem more from the decision to drop out of the workforce entirely, indicating a structural shift rather than a temporary change.

65. Lasting Effects Of Temporary Inflation: Higher Prices, Lower Purchasing Power, Oct. 28, 2021

Paul F Gruenwald, New York, + 1 (212) 437 1710, paul.gruenwald@spglobal.com

  • We continue to believe that U.S. inflation pressures are largely transitory, meaning that under the Fed's currently announced policy settings inflation will come back to the target rate of an average of 2%.
  • However, inflation will be stronger and last longer than initially forecast.
  • While the rate of inflation will come back to the policy target next year, the level of consumer prices will be permanently higher on the order of almost 4%. To the extent that this higher price level is not offset by higher wages, purchasing power will be permanently lower and consumer confidence will likely decline.

66. How U.S. Infrastructure Investment Would Boost Jobs, Productivity, And The Economy, Aug. 23, 2021

Beth Ann Bovino, New York, (1) 212-438-1652, bethann.bovino@spglobal.com

  • As the U.S. economy recovers, the Biden Administration is looking to further strengthen the recovery with an infrastructure funding bill. We've updated our projections on what impact a $1 trillion investment in infrastructure would have on the economy through 2030.
  • We estimate that, in real dollar terms, the project will create more in economic activity than it would cost. In particular, we estimate that a $1 trillion investment in infrastructure would add $1.4 trillion to the economy over an eight-year period--a fiscal multiplier of 1.4x.
  • In terms of jobs, we found that the infrastructure project would create 883,600 jobs by 2030--many middle-class jobs. And per capita income would be $100.50 (10.5%) larger than in the no infrastructure scenario.
  • Private-sector productivity would also get a boost from the infrastructure investment--by around 10 basis points, on average, each year. That productivity boost would likely lift average GDP growth on an annual basis to 2.1% from around 2.0% over the period.
Environmental, Social, And Governance

67. ESG In Credit Ratings Newsletter October 2021, Oct. 21, 2021

Sarah Limbach, Paris, +33-14-420-6708, sarah.limbach@spglobal.com

  • Reinsurers have increased their efforts to incorporate climate change in their decision making process, particularly in risk management, exposure management, and pricing. However, this is still nascent across the industry, and many companies are facing difficulties in implementing climate change considerations robustly.
  • Our scenario analysis suggests that reinsurers' estimates of their exposure to natural catastrophe risk--and therefore physical climate risk--could be underestimated by 33%-50%, which is 91% of the sector's buffer above the 'AA' capital requirement. While not our base case, this scenario illustrates significant potential for volatility in earnings and capital.
  • We consider exposure to the physical risks of climate change to be a key factor in our ratings on 19 of the top 21 rated reinsurers, primarily through our forward-looking assessment of risk exposure. We believe that those companies that take a more proactive approach to understanding and adapting their exposure to climate risk will be better protected against future capital and earnings volatility linked to climate-related losses.
Financial Institutions

68. Asia-Pacific Financial Institutions Monitor 4Q 2021: Evergrande, Southeast Asia Risks, And The Digital Dilemma, Oct. 19, 2021

Gavin J Gunning, Melbourne, + 61 3 9631 2092, gavin.gunning@spglobal.com

  • Asia-Pacific banks are stabilizing, but downside risks lurk in some jurisdictions.
  • The China property sector is under pressure, and growth forecasts are lower across Southeast Asia. These risks are problematic for banks.
  • Emerging trends--including digitalization technologies and an increasingly strong investor focus on ESG risks--could have profound effects on Asia-Pacific banks.

69. The Resolution Story For Europe's Banks: More Resolvability, Consistency, Credibility, Oct. 5, 2021

Giles Edwards, London, + 44 20 7176 7014, giles.edwards@spglobal.com

  • We continue to see a clear intent among policymakers to move from bail-out to bail-in resolution, and this continues to inform our base case for European commercial banks.
  • However, Europe still has plenty to do to complete banks' resolvability and make the prospect of resolution more credible.
  • European banks' ramp-up of subordinated bail-in buffers will continue to support the ratings, as long as the resolution strategy is likely to avoid a default on all senior preferred liabilities.
  • We expect the ongoing review of the EU's crisis management framework to lead to improved consistency and credibility, but to have little ultimate effect on our European bank ratings.

70. EMEA Financial Institutions Monitor 4Q2021: Rebounding Economies Bolster Banks’ Recovery, Nov. 5, 2021

Natalia Yalovskaya, London, + 44 20 7176 3407, natalia.yalovskaya@spglobal.com

  • We believe that banks in Europe, the Middle East, and Africa (EMEA) will continue to recover from pandemic-related stress in 2021-2022. Underpinning our views is the stronger-than-expected rebound in economic activity as vaccination rates continue to rise and social mobility returns.
  • Extensive policy support and favorable financing conditions for borrowers have largely supported the economic rebound across the region. We now expect that asset quality will continue to stabilize, supporting profitability in the sector.
  • Capital and liquidity buffers remain adequate, and funding is available to revive new lending growth, spurred by stable domestic deposits and ample access to capital markets for the majority of issuers in EMEA's financial sector, as well as the currently favorable funding conditions.

71. GCC Banks Hope The Worst Is Over As The Recovery Begins, Oct. 5, 2021

Mohamed Damak, Dubai, + 97143727153, mohamed.damak@spglobal.com

  • Despite economic recovery, private sector lending growth in the GCC countries is likely to remain muted for the next 12-24 months, except for Saudi Arabia.
  • Asset quality deterioration has been limited thanks to support from regulators, but we expect a slight worsening as forbearance measures are lifted.
  • Profitability will stabilize as lower interest rates are offset by reducing cost of risk and good efficiency.
  • Risks related to funding are increasing for Qatar, because western central banks could start to scale back their support measures.

72. Government Support And Improving Economic Sentiment Help Mitigate Sector Vulnerabilities For GCC Banks, Sept. 26, 2021

Zeina Nasreddine, CFA, Dubai, + 971 4 372 7150, zeina.nasreddine@spglobal.com

  • In our view, UAE banks are among the most vulnerable in the GCC region, as a result of their high exposure to real estate and other hard-hit sectors, while Saudi banks are better placed thanks to stronger profitability.
  • Other issues include Qatar's increasing net external debt and Kuwait's fiscal impasse, which may not just hurt the economy but also question the government's ability to support the banking system in a predictable and timely manner.
  • That said, we expect GCC banks' asset quality indicators to deteriorate only slightly thanks to regulatory and government support measures, and improving economic sentiment.

73. Top 100 Banks: Capital Ratios Show Resilience To The Pandemic, Sept. 28, 2021

Cynthia Cohen Freue, Buenos Aires, + 54 11 4891 2161, cynthia.cohenfreue@spglobal.com

  • We expect risk-adjusted capital (RAC) ratios for the top 100 banks to remain resilient in the next two years, with some variation across countries.
  • Bank capital around the world held up well during COVID-19, demonstrating the effectiveness of Basel rules for capital and strengthening of bank supervision in the past 10 years. Some banks were able to recognize the bulk of the credit losses last year, lessening the need to continue raising provisions, while others will take longer to do so.
  • The RAC ratios of the top 100 rated banks remained broadly stable in 2020 compared with 2019, despite the earnings deterioration due to the rise in loan-loss provisions last year. The average RAC ratio was 9.1% in 2020, equal to the one in the prior year.
  • We believe this is mainly due to the following factors: Banks desire to maintain prudent capital buffers to contend with the pandemic; Lower dividend payouts, given restrictions put in place by regulators during the pandemic; The rise of government-guaranteed loans in banks' portfolios, which require less capital; and Credit losses will be spread over a longer time frame in some jurisdictions.

74. As India's Banks Grow Again, Will Old Mistakes Return?, Nov. 29, 2021

Deepali V Seth Chhabria, Mumbai, + 912233424186, deepali.seth@spglobal.com

  • Indian banks are profitable again and credit costs are set to fall to their lowest level in seven years.
  • Stronger balance sheets and higher demand should boost bank loan growth by more than 10% annually over the next two years.
  • However, if risk management does not improve, then the coming growth cycle could produce a new crop of sour loans.

75. Japanese Regional Banks: The Pandemic Bonanza Is A Blip, Sept. 26, 2021

Ryoji Yoshizawa, Tokyo, + 81 3 4550 8453, ryoji.yoshizawa@spglobal.com

  • Profit at Japanese regional banks rose about 5% in fiscal 2020, mainly due to pandemic-related loans.
  • The profit boost will intensify in fiscal 2021 as a higher outstanding balance of loans related to COVID-19 contributes to full-year growth.
  • Fiscal 2022 will see pandemic effects fade, loan repayments gather pace, and the profit-boosting effect at regional banks wane.
  • A prolonged pandemic would worsen business conditions and inflate credit costs for the banks, meaning that in either case, challenges loom from fiscal 2022 onward.

76. Nordic Banks, Even After Generous Payouts, Should Remain Well Capitalized, Oct. 11, 2021

Kristian Pal, Stockholm, kristian.pal@spglobal.com

  • We project Nordic banks' risk-adjusted capital ratio to average 13.3% in 2021, which is higher than our projected average for the top 50 European banks we rate and up slightly from 13.1% at year-end 2020.
  • Pandemic-related policies to shore up capital have led to sizable buffers that are now ripe for dividend payouts and share repurchases, as regulatory requirements begin to normalize.
  • We expect Nordic banks will remain well capitalized compared to European peers, even after they complete capital disbursements.

77. North American Financial Institutions Monitor 4Q 2021: Riding The Economy's Tailwind And Aiming For A Smooth Landing, Oct. 20, 2021

Brendan Browne, CFA, New York + 1 (212) 438 7399, brendan.browne@spglobal.com

  • Banks and nonbank financial institutions (NBFIs) in North America are generally performing well, with earnings up sharply on lower provisions for credit losses and balance sheets in good shape.
  • The proportion of banks and NBFIs with negative outlooks has plummeted in the last year.
  • However, the mix of risks has changed. While the pandemic still poses risks, financial institutions also face threats related to elevated home prices, a booming leveraged loan market, advancing fintech, and an impending change in monetary policy.

78. U.S. Banks' Growing Balance Sheets May Pose Regulatory Capital Constraints, Oct. 11, 2021

Stuart Plesser, New York, + 1 (212) 438 6870, stuart.plesser@spglobal.com

  • After sharp balance-sheet growth last year, some U.S. global systemically important banks (GSIBs) are facing greater capital constraints on a non-risk-weighted basis than on a risk-weighted basis.
  • While the GSIBs are not in danger of imminently breaching capital requirements, further balance-sheet growth could force some to deploy various strategies to maintain buffers above minimums.
  • Potential changes to the calculation of supplementary leverage ratios, while currently uncertain, could provide relief.
  • We don't expect these regulatory capital constraints to result in rating changes, but the challenge of complying with the non-risk-based capital requirements could lead to higher double leverage or affect companies' strategies.

79. The Outlook For Uzbek Banks Is Stable Despite High Competition And Problem Loans, Oct. 7, 2021

Victor Nikolskiy, Moscow, + 7(495)7834010, victor.nikolskiy@spglobal.com

  • Our ratings on Uzbek banks remain low in an international context, but most have stable or positive outlooks, and the banking sector remains resilient to the effects of the COVID-19 pandemic.
  • We expect that competition in the sector will remain high in 2021-2022, while credit growth will decelerate.
  • Reported nonperforming loans should remain elevated versus previously very low levels, reflecting the effects of the pandemic and the seasoning of loan books.
  • We believe that Uzbek banks will continue to rely on domestic funding sources, including funding from the government, but external funding is becoming increasingly important.
Gaming, Leisure, and Lodging

80. Macau Gaming: COVID Remains The Wild Card, Nov. 24, 2021

Aras Poon, Hong Kong, aras.poon@spglobal.com

  • The biggest near-term threat for rated issuers is a slow recovery in gross gaming revenue (GGR) because of COVID19-related travel restrictions:
  • We forecast Macau GGR to still be only 60%-70% of 2019 levels during 2022, and we don't expect a full recovery until 2023 at the earliest.
  • Five negative actions occurred in 2021 and negative bias remains across the portfolio.
  • Regulatory risk is rising, but the immediate credit impact is limited for now:
  • None of the concessionaires or sub-concessionaires is expected to lose their gaming licenses during the rebidding process.
  • Other new regulatory measures are moderately negative, but they are not totally unexpected.
  • How these changes would be implemented is critical and whether they signal further government intervention on casino operations and fund extractions.
Infrastructure

81. Riskier China LGFVs Be Warned: Capital Markets May Cut You Off, Oct. 6, 2021

Laura C Li, CFA, Hong Kong, + 852 2533 3583, laura.li@spglobal.com

  • A liquidity crisis at a local government financing vehicle (LGFV) sends a tough message to the broader LGFV sector.
  • In our view, domestic Chinese markets may not refinance LGFVs that have poor financial controls or weak government oversight.
  • Risky behavior could be punished even for LGFVs that play a key role for their local governments.

82. Infrastructure And Energy Outlook: October 2021, Oct. 5, 2021

Massimo Schiavo, Paris, + 33 14 420 6718, massimo.schiavo@spglobal.com

Energy:

  • Major support policies for rapid decarbonization--such as "Fit For 55" in Europe and a potential $3.5 trillion U.S. clean energy framework proposed by President Biden--represent a significant investment opportunity for electric utilities.
  • However, recent inflation in the cost of renewables production could stall growth if it endures and challenges the 40% cost decline anticipated over the next decade. For 2021, S&P Global Platts Analytics forecasts a rise in costs of 10% for solar photovoltaic plants, 8% for onshore wind projects, and 4% for offshore wind projects.
  • We also see rising policy risk for power producers, given that energy affordability issues or blackout risks could materialize if the rollout of new renewables and power storage capacity isn't aligned with the decommissioning of coal and nuclear plants.
  • Oil and gas players will also contend with accelerating the transformation of their portfolio toward lower-carbon power sources.

Air traffic:

  • Domestic travel numbers reached 85% of the 2019 level in July this year across the Americas and Asia, but international traffic only 26%, according to the International Air Transport Association (IATA), signaling an uneven and protracted recovery of global air traffic.
  • The upswing in domestic air travel during the summer contributed to the return of our outlooks on U.S. airports to stable this year, even though the spread of the delta variant of the coronavirus has triggered a more cautious near-term stance.
  • In Europe, air traffic reached only 20%-25% of 2019 levels in January-July, and almost all our airport ratings still carry negative outlooks; even if traffic picks up to about 40%, the full-year average will be at the bottom of the 30%-50% range we expected.
  • The situation is mixed in Asia-Pacific, where international travel through Australian airports is just 1%-3% of that in 2019 and, although domestic air travel increased to 60%-80%, recurring lockdowns have led to significant fluctuations.
Infrastructure - Healthcare

83. Infrastructure Post-COVID-19: Funding Canadian Provinces' Rising Health Care Spending Budgets, Oct. 19, 2021

Dhaval R Shah, Toronto, + 1 (416) 507 3272, dhaval.shah@spglobal.com

  • COVID-19 has provided a catalyst for renewed health care infrastructure spending by Canadian provinces.
  • Given provinces' need for balancing priorities, the public-private partnership (P3) model could play a more important role in delivering increased investments in health care.
  • Canada's P3 activity peaked in 2015. Since then, health care P3s lost steam compared to transportation sector investments. Our rated Canadian health care P3's construction and operation performance has been robust so far, although P3s are exposed to unique challenges.

84. Canadian Health Care P3s: Robust Performance And Risk Mitigation Outweigh Challenges, Oct. 19, 2021

Siddharth Bhatia, Toronto, + 1 (416) 507 2514, Siddharth.Bhatia1@spglobal.com

  • Historically, public-private partnerships (P3s) have played an important role in delivering Canadian health care infrastructure with C$19.24 billion invested in 49 projects with construction and operations and/or maintenance risk.
  • The performance of S&P Global Ratings' rated health care P3 portfolio has been robust and shown that risk-transfer mechanisms have generally worked. However, there have been performance-related hiccups on certain health care P3s and counterparty creditworthiness remains key to project rating.
  • During operation, ramp-up and size of facilities are critical for the facilities' performance. Maintaining appropriate temperature/humidity and availability of elevators are common operation challenges faced by hospital projects. Effective lifecycle management over the life of the concession is key as these facilities age.
Infrastructure - Transportation

85. Airports Face A Long Delay To Global Air Traffic Recovery, Sept. 24, 2021

Julyana Yokota, Sao Paulo, + 55 11 3039 9731, julyana.yokota@spglobal.com

  • Domestic travel numbers reached 85% of the 2019 level in July this year across the Americas and Asia, but international traffic only 26%, according to the International Air Transport Association (IATA), signaling an uneven and protracted recovery of global air traffic.
  • The upswing in domestic air travel during the summer contributed to the return of our outlooks on U.S. airports to stable this year, even though the spread of the delta variant of the coronavirus has triggered a more cautious near-term stance.
  • In Europe, air traffic reached only 20%-25% of 2019 levels in January-July, and almost all our airport ratings still carry negative outlooks; even if traffic picks up to about 40%, the full-year average will be at the bottom of the 30%-50% range we expected.
  • The situation is mixed in Asia-Pacific, where international travel through Australian airports is just 1%-3% of that in 2019 and, although domestic air travel increased to 60%-80%, recurring lockdowns have led to significant fluctuations.
Infrastructure - Power And Utilities

86. China's Power Outages--Get Used To It, Oct. 18, 2021

Apple Li, CPA, Hong Kong, + 852 2533 3512, apple.li@spglobal.com

  • As fuel shortages hit Europe and India, and global crude prices jump, China is dealing with its own energy crunch. Coal shortages have forced parts of the country to curtail output to industrial producers, saving power for residences. Swaths of rated entities are affected, most particularly China's independent power producers (IPPs), and the steel, aluminum, and cement makers.
  • The events are connected, that shortfalls and bottlenecks are becoming common as the world economy pulls out of COVID. This will create disruptions and hit ratings, often in unpredictable ways.
  • We also expect that the global push to green energy makes economies more vulnerable to swings in the supply of renewable power, which is typically weather dependent.

87. China's Gas Distributors Won't Get Burned By Higher Costs, Oct. 7, 2021

Yuehao Wu, CFA, Singapore, + 65 6239 6373, yuehao.wu@spglobal.com

  • Prevailing gas prices in China this year are likely to surpass the last peak in 2018 and become increasingly volatile over coming years.
  • Volume growth should compensate for dollar margin compression, supporting the credit profiles of our rated issuers, which also benefit from solid financial headroom and scalable capital expenditure.
  • Optimizing gas procurement strategies and execution will help to solidify market positions in a consolidating market.

88. Price Tremors Threaten Europe's Gas Bridge, Oct. 5, 2021

Elena Anankina, CFA, Moscow, + 7 49 5783 4130, elena.anankina@spglobal.com

  • This year's steep rise in gas prices caught Europe by surprise, highlighting the region's mounting vulnerability to weather conditions, and increasing competition from other regions for LNG cargoes amid tight supply.
  • We expect rebalancing the European gas market will take time because certain key drivers are structural, and we believe that Nord Stream 2 alone cannot fill the gap.
  • With the EU currently debating the role of gas in the Green Taxonomy and likely new decarbonization pledges at COP 26 in November, extremely volatile gas prices raise questions about how well gas can support security of supply during the energy transition, and at what cost.
  • We believe that, ultimately, it may become even more difficult for Europe to reconcile its increasing reliance on gas imports with tightening environmental restrictions.

89. Fit for 55: The Gains (And Pains) For European Utilities, Sept. 29, 2021

Pierre Georges, Paris, + 33 14 420 6735, pierre.georges@spglobal.com

  • We see the EU's Fit for 55 decarbonization plan as largely positive for the European utilities sector because it will provoke an investment supercycle to massively expand renewables generation fleet and upgrade energy networks.
  • Yet, the energy transition will not be smooth. New, greener technologies, which still need to develop further to push down costs and boost efficiency, will only gradually replace conventional thermal and nuclear generation.
  • Therefore, utilities face a number of rising risks: managing a fragile supply-demand balance in the European energy system at least until 2025; maintaining affordability to minimize social and political risks; and overcoming hurdles in the delivery of new projects, including permitting, inflation, supply chain disruption, and human resources.

90. Spain's Plan To Claw Back Billions From Utilities Could Stunt Renewables Growth, Sept. 29, 2021

Claire Mauduit-Le Clercq, Paris + 33 14 420 7201, claire.mauduit@spglobal.com

  • Spain's power generation companies could lose about €3.2 billion in earnings in 2021-2022 due to legislation aiming to cap their profits to cushion the impact of rising power prices for about 40% of residential customers.
  • If the one related to gas remains temporary, these measures won't hurt rated utility companies' credit profiles, but they'll shave a cumulative 55 basis points (bps) to 750 bps off their credit metrics headroom, reducing scope to accelerate investments in the energy transition.
  • We believe that, in the longer term, such intervention could undermine investor confidence and capital allocation, which are critical to the success of Spain's ambitious national energy and climate plan.

91. The Energy Price Crisis: Examining The Impact On U.K. Suppliers, Sept. 30, 2021

Aarti Sakhuja, London, + 44 20 7176 3715, aarti.sakhuja@spglobal.com

  • The spike in wholesale spot energy prices has sparked a liquidity crunch for several U.K. suppliers, with 12 exits from the market so far in 2021.
  • We believe that the four U.K. energy suppliers rated by S&P Global Ratings will be able to withstand the crisis, largely due to their more efficient hedging positions, and better access to capital and liquidity.
  • We expect further consolidation in the number of operators--particularly for smaller players--as the U.K. heads into the winter months with energy prices remaining high.
  • Moreover, we think the likelihood of state intervention will increase if the remaining operators hit liquidity and administrative constraints in their ability to further absorb large customer books.
  • The October price cap reset and the imposition of an industry levy to absorb the burden of failed suppliers will challenge household energy affordability, particularly as supportive government measures, such as furlough, end.

92. A $1 Trillion Infrastructure Plan: Credit Perspectives For U.S. Investor-Owned Regulated Electric Utilities, Nov. 9, 2021

Obioma Ugboaja, New York, 1 (212) 438 7406, obioma.ugboaja@spglobal.com

  • On Nov. 5, 2021, the U.S. Congress passed legislation on a $1 trillion infrastructure spending plan that includes several provisions affecting the U.S. electric grid, and many are potentially favorable for credit quality.
  • Broadly, the infrastructure legislation aims to allocate about $65 billion of investment toward the electric transmission grid, $50 billion to protect against physical risk, and about $7.5 billion to build a network of electric vehicle (EV) charging stations across the U.S.
  • We think the infrastructure plan is also linked to the Biden Administration's broader climate goals, including a plan to move the U.S. toward 100% carbon-free electricity by 2035.
  • As such, the longer-range implications for credit quality rests on how well the electric utilities affected by these rules manage the pace of transition to a cleaner energy future.
Insurance

93. Asia-Pacific Reinsurers: More Volatility To Come As Risks Evolve, Nov. 4, 2021

WenWen Chen, Hong Kong, + 852 2533 3559, wenwen.chen@spglobal.com

  • Changing risk landscapes will increase balance-sheet volatility for Asia-Pacific reinsurers.
  • New variants of risk should force the sector to review risk-return expectation and recalibrate pricing models.
  • Alternative capital sources and policymakers' concerted effort to narrow protection gaps will lift demand for reinsurance.

94. Lockdowns Give Australian Health Insurers Profit Bump, Sept. 1, 2021

Angela Zhou, Melbourne, + 61.2.9255.9841, angela.zhou@spglobal.com

  • Extended lockdowns on the east coast of Australia are lifting profits for the country's health insurers.
  • The temporary profit bump, which is likely to continue through fiscal 2022, stems from a combination of rising awareness of health-related insurance, the geographic scope of the lockdowns impacting access to services, and the high likelihood that a portion of deferred claims will be permanently lost.
  • Stronger profitability will temporarily delay industry consolidation. The industry will benefit from both lower claims and an expected increase in new premium from members due to greater awareness of health-related insurance.

95. EMEA Insurance Outlook 2022: Fighting Fit For 2022, Nov. 16, 2021

Volker Kudszus, Frankfurt, +49-69-3399-9192, volker.kudszus@spglobal.com

  • EMEA insurers' capital surplus has largely recovered, and now stands at 92% of its pre-pandemic level. For the EMEA insurance sector in aggregate, capitalization is 9% above the 'AA' category, which supports our current ratings.
  • Although competition is picking up in motor insurance, the non-life sector is expected to maintain solid insurance margins. Low and negative interest rates remain a burden for life insurers but, for many, we expect margins to bottom out at pre-pandemic levels.
  • In many cases, the quality of capital remained high, with hard capital providing a solid base and hybrid capital limits underused. However, the re-emergence of other uses of capital, such as progressive dividends, share buybacks, and mergers and acquisitions (M&A), suggests that capital adequacy will remain at about the current level.
  • EMEA insurers are well prepared for the current and upcoming challenges. In 2021, upgrades outpaced downgrades, and we saw limited downside risk. That said, we do not expect this trend to continue into 2022.

96. EMEA Insurance Monitor: November 2021, Nov. 8, 2021

Mark D Nicholson, London, + 44 20 7176 7991, mark.nicholson@spglobal.com

  • The European insurance sector is mostly back to the previous status quo, that is, the lower-for-longer interest rate environment. In some markets, vehicle traffic is still below historical levels, benefitting motor insurers with lower frequency claims.
  • Flooding events and wildfires in Europe have come at great human and economic cost; the insured loss appears manageable for rated non-life insurers in those regions.
  • Despite rate increases in the reinsurance sector in 2021, challenges remain for those reinsurers with exposure to flooding events in Europe, China, and, in the U.S., California wildfires and a busy start to the U.S. hurricane season. 2021 may become an active claims year for reinsurers.

97. Top 40 EMEA Insurers Remain Resilient To Lingering Pandemic Risks, Aug. 26, 2021

Varun Bhalla, Dubai, + 97143727181, varun.bhalla@spglobal.com

  • In 2020, COVID-19-related claims largely shaped insurers' profitability, with a few facing earnings pressure. However, given the relatively modest scale of the losses, as well as the mitigating actions taken by management teams, the pandemic was an earnings event for the insurance industry.
  • On the investment side, most insurers hold highly rated liquid bonds. Higher capital requirement needs under Solvency II for high-risk assets--such as equity and real estate--discourage insurers in the European Economic Area from materially increasing their exposures in these asset classes.
  • Volatile capital markets, low interest rates, and the potential downward migration of ratings on corporate bonds are key risks that the top 40 EMEA insurers could face this year.
  • Despite disruption caused by the pandemic, the insurance sector was one of the most resilient in 2020, and we expect that to remain the case in 2021.

98. Global Reinsurance Highlights 2021 Navigating Uncharted Waters, Nov. 17, 2021

Johannes Bender, Frankfurt, +49-693-399-9196, johannes.bender@spglobal.com

  • This includes key takeaways from The Global Reinsurance Sector Outlook Remains Negative As Returns Fall Short, Global Reinsurers Are Grappling With How To Incorporate Climate Change Risk, Cyber Risks In A New Era: Reinsurers Could Unlock The Cyber Insurance Market, Five Years Of Over-Budget Catastrophe Losses Test Global Reinsurers' Discipline and Reinsurers Use Of Insurance-Linked Securities Is Set To Increase Amid Rising Catastrophe Losses.

99. The Global Reinsurance Sector Outlook Remains Negative As Returns Fall Short, Oct. 28, 2021

Taoufik Gharib, New York, + 1 (212) 438 7253, taoufik.gharib@spglobal.com

  • The global reinsurance sector again won't earn its cost of capital in 2021 and could struggle to do so in 2022.
  • This year could be the fifth consecutive year in which the top 21 global reinsurers deplete their annual natural catastrophe budgets, and these top reinsurers shoulder close to half of total COVID-19-related insured losses.
  • However, the sector's capitalization remains robust with redundancy at the 'AA' confidence level, benefiting from capital raises and financial markets' recovery.
  • We expect reinsurance pricing to strengthen in 2022 in response to 2021's elevated losses.

100. Cyber Risks In A New Era: Reinsurers Could Unlock The Cyber Insurance Market, Sept. 29, 2021

Manuel Adam, Frankfurt, + 49 693 399 9199, manuel.adam@spglobal.com

  • Prices in the cyber re/insurance market could rise sharply over 2021-2023; in some cases, doubling from the current levels. The pandemic accelerated digital transformation and increased systemic vulnerabilities, causing economic and insured losses from cyber to skyrocket.
  • We estimate that primary insurers pass 35%-45% of global cyber premium to reinsurers and rely on them for their expertise in managing potential accumulation risk and exposure to cyber risk.
  • Partnership between reinsurers and primary insurers could strengthen coverage and give greater balance sheet protection against frequent and high-severity losses. It could also support access to cyber-related services.
  • A more mature retrocession and insurance-linked securitization (ILS) market could increase capacity and support cyber market growth and could lead to better returns on capital because of efficient capital management further down the re/insurance chain.

101. Dutch Insurers Remain On Sound Financial Footing Despite The Pandemic, Sept. 9, 2021

Mark D Nicholson, London, + 44 20 7176 7991, mark.nicholson@spglobal.com

  • Dutch insurers have largely ridden out the COVID-19 pandemic, albeit with a hit to their investment income, and we expect economic recovery will support margins and investment results in 2021-2022.
  • In 2020, Dutch life insurers' operating income remained neutral, property and casualty (P&C) insurers benefitted from fewer claims, and health insurers reported positive results thanks government support.
  • Dutch insurance markets remain highly competitive and concentrated, and we believe new risks related to climate change and cyber security will result in significant regulatory and operational changes for insurers in 2021.
  • Despite challenging conditions, the credit profiles of the four Dutch insurance groups we rate remain robust, supported by strong capitalization.
Leveraged Finance

102. European Leveraged Finance And Recovery Third-Quarter 2021 Update: Hitting The Wall After The Sprint To Midyear, Nov. 16, 2021

Marta Stojanova, London, + 44 20 7176 0476, marta.stojanova@spglobal.com

  • The majority of new issuance in the third quarter funded mergers and acquisitions (M&A) and dividend recaps, which in turn could delay leverage improvements and the pace of upgrades; average weighted leverage for speculative-grade issuers increased to 6.7x in third-quarter 2021 from 6.0x at end of 2019.
  • Credit quality stabilization continued, though the pace of upgrades has slowed. Negative outlooks have reverted to prepandemic levels, apart from specific sectors such as entertainment, travel, and leisure, where a recovery is yet to materialize.
  • The number of weakest links has nearly halved since the pandemic high, particularly in the 'B-' category, though largely this is due to outlook stabilization rather than upgrades. The default tally dropped to two this quarter as recovery pressures were concentrated in a handful of pandemic-hit sectors, pointing to decreased overall default risk in the near term.
  • Cash-to-debt balances are trending back to prepandemic levels across the rating spectrum, since EBITDA improvements, bolt-on M&A, and dividend recaps have brushed aside liquidity concerns that arose during the pandemic's first wave.
  • The average recovery estimate for European rated first-lien secured debt was stable at 57% in third-quarter 2021; it was 55% for new issues.

103. U.S. Leveraged Finance Q3 2021 Update: Leverage Is Getting Better (Almost) All The Time, Oct. 21, 2021

Hanna Zhang, New York, + 1 (212) 438 8288, Hanna.Zhang@spglobal.com

  • U.S. and Canadian speculative-grade borrowers' overall leverage has returned to pre-pandemic levels, according to financial data pooled from 1,046 public and private companies.
  • The chemicals and consumer products sectors are leading the way in deleveraging, having capitalized on the rebound in the U.S. economy and spending levels.
  • Our analysis revealed that the moderation in leverage stemmed more from EBITDA growth than debt reduction; median LTM EBITDA has surpassed the 2019 level after growing 28% in the first half of 2021.
  • The resurgence in borrowing was largely driven by M&A and dividend recaps, which could delay any rating improvements.
  • Of the cash holdings in the sample, 58% resides with entities rated in the 'BB' category, while only a small fraction (3%) is held at 'CCC' and 'CC' rated entities.
  • Average recovery estimates of first-lien new issues continue to hover around the low- to mid-60% area; it was 63% for third-quarter 2021.

104. The S&P/LSTA Leveraged Loan Index Default Rate Is Expected To Reach 1% In June 2022, Sept. 2, 2021

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • In our base case, we expect the S&P/LSTA Leveraged Loan Index issuer default rate to remain low, reaching 1% in June 2022.
  • In our optimistic scenario, the default rate declines slightly to 0.5%, and in our pessimistic scenario, the default rate rises to 2.75%.
  • We expect to see few defaults in the index in the 12 months through June 2022, with the surge in new debt issuance supporting issuer liquidity and strong economic growth expected through at least 2023.
  • Even with the strong economic recovery underway, the index remains vulnerable to a shock due to the lingering credit impact from the 2020 recession, with 38% of issuers in the index rated 'B-' or lower.
Media and entertainment

105. Rebooting The U.S. Media Sector: Double-Digit Advertising Growth Can Thank Digital, Sept. 1, 2021

Naveen Sarma, New York, + 1 (212) 438 7833, naveen.sarma@spglobal.com

  • S&P Global economists currently expect U.S. GDP to grow 6.7% in 2021 and 3.7% in 2022.
  • We updated our U.S. advertising forecast for 2021 and now expect advertising will grow by 14.4% (previously 7.8%), underpinned by strong 25% growth in the digital segment.
  • Many ad-based media sectors continue to see sequentially improving advertising trends since the second-quarter 2020 bottom. Besides digital, TV and billboards are pacing ahead of our expectations, while radio's recovery will only reach 90% of 2019 levels by the end of 2022 before it resumes declining, and transit's recovery remains a 2022-2023 event. Our ratings actions in the sector reflect these differences.

106. U.S. Media And Entertainment Industry Check-In, Sept. 1, 2021

Naveen Sarma, New York, + 1 (212) 438 7833, naveen.sarma@spglobal.com

  • We're nearly two-thirds of the way through 2021 and the U.S. media and entertainment industry is still working to put the effects of the COVID-19 pandemic behind it. That said, the recovery in the advertising-focused media sectors has been more robust than in other sectors because advertising spending began recovering in the third quarter of 2020 and will, in aggregate, surpass pre-pandemic levels (in 2019) by the end of 2021.
  • For the rest of the year, we will remain focused on the pace of the recovery in out-of-home (OOH) entertainment, the post-pandemic future of the film industry, and--most importantly--when the credit measures of industry participants will return to pre-pandemic levels.
  • Industry consolidation has accelerated due to the need for greater content and geographic scale.
Public Finance

107. Argentine Provinces Will Have To Navigate Rough Waters To Remain Afloat, Nov. 11, 2021

Carolina Caballero, Sao Paulo, (55) 11-3039-9748, carolina.caballero@spglobal.com

  • Argentine provinces, which S&P Global Ratings rates, reduced their foreign currency debt service payments to $480 million annually in 2021-2022 (from $2.3 billion), but they will nearly double in 2023.
  • Given that Argentine local governments are shut out of international capital markets, a commitment to fiscal consolidation and liquidity management will help avoid a new wave of defaults.
  • The provinces' ability to do so will also hinge on the sovereign's ability to reduce drastic macroeconomic imbalances, improve relations with official creditors, and regain access to global market financing.

108. Australian States Embark On The Recovery Path, Nov. 28, 2021

Rebecca Hrvatin, Melbourne, + 61 3 9631 2123, rebecca.hrvatin@spglobal.com

  • Rating outlooks on Australian states are mixed. The amount of actions is slowing following the record number last year.
  • The operating performance of Australian states is improving after the onslaught of the COVID-19 pandemic as strong vaccine uptake reduces the risk of further lockdowns and government support.
  • Record infrastructure programs and blows to state finances from the pandemic will drive debt to record levels.

109. As Canadian Municipalities Negotiate A New Landscape, Prudent Management Remains Crucial, Nov. 8, 2021

Dina Shillis, CFA, Toronto, + 1 (416) 507 3214, dina.shillis@spglobal.com

  • The financial impact of the COVID-19 pandemic on Canadian municipalities has been relatively benign.
  • The institutional framework in Canada remains stable and supportive.
  • To maintain creditworthiness, municipal governments will need to balance key priorities against tapering support as operations normalize in the next two years.

110. Canadian Local And Regional Government Debt: Economic Recovery And Sound Fiscal Management Are The Keys To Debt Stabilization, Sept. 8, 2021

Stephen Ogilvie, Toronto, + 1 (416) 507 2524, stephen.ogilvie@spglobal.com

  • The widening of provincial deficits brought on by the COVID-19 pandemic will supercharge borrowing by Canadian local and regional governments (LRGs) in 2021 and, to a lesser degree, in 2022.
  • S&P Global Ratings expects that total provincial and municipal debt will increase by about 9% in 2021, reaching C$1.16 trillion by year-end.
  • Borrowing will fund operating deficits (in all but one province), capital expenditures, and the refinancing of maturing debt.
  • Debt issuance will remain bond-based, dominated by fixed-rate provincial bonds issued in the domestic market.

111. China Local Governments: Higher For Longer Fiscal Imbalances, Nov. 22, 2021

Alex Lam, Hong Kong, + 852 2533 3552, alex.lam@spglobal.com

  • Local government credit profiles to remain resilient despite a bevy of new challenges.
  • Sector-wide deficits to stay elevated in 2022, with an expansionary fiscal stance like in 2020 and 2021.
  • To contain their own debt burdens, local governments will be selective in their support to SOEs.

112. China's Falling Land Sales Will Press Change On LGFVs, Nov. 10, 2021

Laura C Li, CFA, Hong Kong, + 852 2533 3583, laura.li@spglobal.com

  • A slump in China land sales will be painful for local government financing vehicles (LGFV), given such sales are a key source of revenue.
  • This will harden the reform imperative to focus on investment projects that can pay for themselves.
  • LGFVs will be kept afloat only with substantial and smooth refinancing.

113. China Property Strains Will Roll Off Local Governments, And Land On Their SOEs, Nov. 10, 2021

Susan Chu, Hong Kong, (852) 2912-3055, susan.chu@spglobal.com

  • Land sales by China's local governments will decline by 5% in 2021, 20% in 2022 and by another 5% in 2023, amid a slowdown of the domestic property sector.
  • We believe the decline in property revenues will increase the spending discipline of local governments, which will need to manage fiscal imbalance challenges.
  • The most pressure will fall on local governments' large state-owned enterprises, given one-third of the entities' debt is associated with the property sector.

114. China's Local Governments Will Address Evergrande--Quietly, Behind The Scenes, Oct. 5, 2021

Alex Lam, Hong Kong, + 852 2533 3552, alex.lam@spglobal.com

  • China Evergrande Group's likely default won't hurt the credit profiles on China's local governments, S&P Global Ratings believes.
  • While Evergrande's outstanding debt is vast, its troubles are unlikely to pose contagion risk at the local government level, nor to significantly undermine social stability. As such, we do not expect Evergrande-related disruptions to burden the fiscal standing of local governments. Governments' role should be behind the scenes, minimizing grievances and ensuring the developer delivers unfinished homes to buyers.
  • There remain tail risks for local governments. At the top of this list is the downside scenario of a deep and prolonged downturn in the property market, which drives about one-quarter of the Chinese economy. This would depress local government land sales, curtailing a major source of funding. This could lead to delays in key local infrastructure projects.

115. French LRGs Start The COVID Recovery On Solid Footing, Sept. 6, 2021

Etienne Polle, Paris, (+33) 01 40 75 25 11, etienne.polle@spglobal.com

  • COVID-19's budgetary impact on French local and regional governments was more moderate than anticipated at the pandemic's onset.
  • Local tax revenue--in particular, property transfer fees--proved more resilient than expected.
  • The extraordinary and direct budgetary support from the central government was relatively low, although LRG finances were cushioned by robust institutional arrangements, including stable ordinary transfers and revenue guarantees.
  • The credit quality of French local authorities was broadly stable over the past 18 months, with financial metrics expected to improve by 2022. This recovery should foster stability, although prudent spending plans and tight financial management will be necessary to restore pre-pandemic budgetary positions.

116. Local And Regional Governments Outlook 2022: Long-Term Challenges Resurface As The Pandemic Eases, Nov. 17, 2021

Felix Ejgel, London, + 44 20 7176 6780, felix.ejgel@spglobal.com

  • Substantial central government support during the COVID-19 pandemic and a solid ongoing economic recovery are helping preserve the credit quality of most local and regional governments (LRGs) outside the U.S.
  • Short-term budget risks, stemming from winding down of central government support, slower revenue base recovery, higher inflation, and liquidity concerns for lower-rated LRGs, underpin most negative outlooks.
  • Increasing demographic pressure, alongside potential tougher energy transition agendas that compound infrastructure investment backlogs, might lead to higher LRG credit volatility over the medium term.

117. Pension Pressure Lingers For Largest U.S. Cities Despite Federal Stimulus, Nov. 29, 2021

Bobby E Otter, Chicago, + 1-312-233-7071, robert.otter@spglobal.com

  • Pandemic-related federal stimulus provided funding for the cities surveyed, helping to alleviate immediate budgetary pressure, even if federal stimulus could not be used to fund pension payments.
  • Funded ratios remained relatively stable, with the overall median increasing slightly, and we estimate reported funded levels will improve in fiscal 2021 given generally strong market returns to date.
  • Fixed debt service and retirement costs remain high for several cities surveyed which could cause downward rating pressures over the long term.
  • For most cities surveyed, pension contributions outpaced budgetary growth over the past decade.

118. For U.S. Public Power And Electric Cooperatives, There Are Hurdles On The Path To Decarbonization, Nov. 8, 2021

David N Bodek, New York, + 1 (212) 438 7969, david.bodek@spglobal.com

  • Although the U.S. electric utility sector has reduced carbon emissions over the past decade, much work remains to be done.
  • Preserving credit quality will require public power and electric cooperative utilities to maintain affordable rates and provide reliable service as they transition from carbon-based power resources.
  • To achieve affordability and reliability goals, utilities need to identify economical solutions that mitigate the intermittency of renewable resources and their sizable spatial requirements.

119. Cyber Risks In A New Era: Utilities Are Cyber Targets And Need To Plan Accordingly, Nov. 3, 2021

Jenny Poree, San Francisco, + 1 (415) 371 5044, jenny.poree@spglobal.com

  • S&P Global Ratings evaluates cyber security risks at U.S. utilities in our Operational and Management Assessment and as a component of environmental, social, and governance risks.
  • Given that water and sewer services are critical to health and safety as well as the economy, the sector is particularly attractive to bad actors and cyber attacks could be devastating if not properly managed.
  • Many U.S. utilities have historically prioritized the maintenance of their physical assets over their data-related systems, but the allocation of resources will need to be rebalanced to fully mitigate cyber risk.
  • Failure to implement the most basic standards of cyber security indicates potential credit vulnerabilities, which can result in a lower rating given that a cyber incident can cause financial, legal, and reputational risk and even result in loss of life.

120. Texas Winter Storm Brought Downgrades And Spurred Response Among Public Power And Electric Cooperative Utilities, Nov. 1, 2021

Paul J Dyson, Austin, + 1 (415) 371 5079, paul.dyson@spglobal.com

  • Last February's storm disruptions of the Texas electricity and gas markets resulted in a significant number of negative rating actions for electric cooperatives and public power utilities.
  • Credit deterioration largely stemmed from utilities' having to procure electricity or natural gas in significantly higher-than-usual quantities at extremely elevated prices for almost a week, which led to financial challenges.
  • Despite legislative approval allowing securitization of "extraordinary costs" for wholesale purchases, and new Public Utility Commission rules requiring weatherization, uncertainty remains as to additional market reforms that will shield utilities and their customers from recurrences.
  • Utilities and the regulator have yet to demonstrate the effectiveness of market reforms, including winterization measures.

121. Online Sales Tax Collections Continue To Grow; Helped Offset Pandemic Declines Last Year, Oct. 28, 2021

Michael Parker, Centennial, + 1 (303) 721 4701, michael.parker@spglobal.com

  • Since the South Dakota v. Wayfair Inc. decision in June 2018, online sales tax collections have surged across the U.S. with the enactment of economic nexus laws, which consider remote sellers to have an economic presence in a state if they meet certain sales or revenue thresholds.
  • All states with a sales tax have enacted marketplace facilitator collection laws. This requires online marketplaces to collect taxes on behalf of their sellers, leading to more online sales being incorporated into governments' tax bases.
  • Online sales tax collections helped mitigate pandemic-related declines in total sales tax collections for many U.S. cities in 2020 and we expect these collections will help support sales tax revenues as online sales proliferate the marketplace.

122. Cyber Risk In A New Era: Are Third-Party Vendors Unwitting Cyber Trojan Horses For U.S. Public Finance?, Oct. 25, 2021

Thomas J Zemetis, New York, + 1 (212) 4381172, thomas.zemetis@spglobal.com

  • Digitalization in operations and IT services can increase risks of cyber attacks for U.S. public finance (USPF) issuers if proper vendor risk management is not in place.
  • Integration of third-party vendor risks into a comprehensive cyber-defense strategy is an important aspect for an issuer to help reduce the frequency and mitigate the effects of a cyber attack.
  • Failure to incorporate these risks into risk-management policies could result in negative rating pressure if an issuer's practices seem materially weaker than those of peers.
Real Estate

123. China Property Watch: Strains In The Key Of 'B', Oct. 27, 2021

Matthew Chow, CFA, Hong Kong + 852 2532 8046, matthew.chow@spglobal.com

  • The liquidity of about one-third of China's rated developers may be acutely strained in the most severe case of our scenario analysis
  • 'B' category issuers are most exposed, as they rely heavily on alternative funding, including hidden debt via joint ventures, and trust loans; investors are pulling out of these funding channels
  • Defaults are rising with US$84 billion of debt coming due in bond markets (offshore and domestic) over the next five quarters.

124. China Developers Battle Tight Liquidity And Plummeting Profitability, Sept. 5, 2021

Fan Gao, Hong Kong, + (852) 2533-3595, fan.gao@spglobal.com

  • Developers in China will likely continue offering discounts, pushing sales at the expense of margin. They need the cash to shore up liquidity amid financing caps and tougher market access for some players.
  • Overall conditions will stay difficult as Chinese authorities seek to curb developers' windfall profits and tamp down financial risks in the sector after years of price appreciation.
  • Developers have made moderate progress in deleveraging their balance sheets. Interim reports show that the 50 developers we rate slightly deleveraged in the first six months of 2021, on the back of a 31% surge in revenue and 0.4% debt reduction. However, profitability suffered.

125. Real Estate Recovery To Be Uneven In Dubai, Oct. 11, 2021

Tatjana Lescova, Dubai, + 97143727151, tatjana.lescova@spglobal.com

  • So far this year, residential real estate prices in Dubai have been rebounding strongly from a record low at end-2020--since the peak in 2014--on the back of pent-up demand from both international and local buyers, improved investor and consumer sentiment, a rebound in oil and gas prices, and gradual macroeconomic recovery, which in Dubai has been supported by high COVID-19 vaccination rates and new visa and corporate ownership rules.
  • Dubai's real estate sector will likely benefit from the World Expo 2020--which started a year late this October due to the pandemic--but structural oversupply of residential properties will challenge price increases over the long term, making the recovery fragile.
  • In our view, higher presales will contribute to stronger revenue for the real estate developers over the longer term. That said, over our 2021-2022 forecast horizon, developers might see improved credit metric headroom for the current ratings thanks to stronger cash flow from inventory sales.
  • Pressure on rents in the oversupplied retail and office segment will persist, and hotel operators' recovery will be sluggish given our assumption that international tourism won't regain momentum before 2022 or later.

126. Hong Kong Retail Properties Take The Baton In Recovery Relay, Oct. 27, 2021

Oscar Chung, CFA, Hong Kong, +(852) 2533-3584, oscar.chung@spglobal.com

  • Hong Kong developers and landlords are likely to remain steadfast in their credit profiles in the next 12 months.
  • Retail properties could be the next pillar of growth for the sector because spot rents could gradually recover when travel restriction ease. Residential prices will remain resilient although volume growth may lose steam.
  • Office vacancy appears to be peaking, but we expect spot rents to linger at low levels due to new supply.

127. Indonesia Developers: Improved Sales Support Stabilizing Credit Quality, Nov. 15, 2021

Simon Wong, Director, Corporate Ratings

  • Favorable regulatory polices supported strong sales recovery in 2021. In 2022, growth momentum will moderate should policies taper off.
  • Credit metrics recovering but limited upside.
  • Indonesia vs Vietnam are in different stages of property cycle.
REITs

128. REITrends: North American REITs Stay The Recovery Course With Solid Second-Quarter Trends, Sept. 1, 2021

Ana Lai, CFA, New York, + 1 (212) 438 6895, ana.lai@spglobal.com

  • Earnings rebounded significantly in the second quarter demonstrating that REITs are on the right track for a solid comeback
  • The number of negative rating actions are easing up as operating performance and credit metrics recover and more rating outlooks are returning to stable.
  • Low rates and recovering credit quality are keeping borrowing costs low and capital markets active, and REITs are positioned to grow again.
Retail And Restaurants

129. Holiday 2021 Sales Outlook: Santa's Bag Is Filled This Holiday Season, Thanks To Deep Consumer Pockets, Nov. 23, 2021

Andy G Sookram, New York, + 1 (212) 438 5024, andy.sookram@spglobal.com

  • S&P Global Ratings analysts in the retail, restaurant, and consumer goods sectors collectively forecast an 8.5% increase in retail sales during the November and December 2021 holiday season.
  • An elevated consumer saving rate continues to support spending across categories, underpinned by consumers' desire to make the most of in-person celebrations this year.
  • However, ongoing supply chain bottlenecks, inflation, and labor shortages could dampen retailers' top lines and crimp margins.
  • We expect overall credit quality to remain stable as retailers offset higher costs and potentially lower volumes with consumers' willingness to absorb higher prices.

130. Labor And Supply Chain Woes Chill Retail Spirits For Holidays And Beyond, Sept. 28, 2021

Andy G Sookram, New York, + 1 (212) 438 5024, andy.sookram@spglobal.com

  • An ongoing merchandise supply-and-demand imbalance and labor shortages will pressure retailers' performance and profitability well into 2022.
  • COVID-19 variants create additional uncertainty for the industry.
  • We believe most large investment grade issuers have cushion in their credit metrics to absorb modestly higher costs.
  • We think speculative-grade issuers could be more at risk because they have less leverage with suppliers, smaller scale to absorb cost increases, and less flexibility to manage labor shortages.
Sovereigns

131. Will COVID-19 Waves Wash Away Sovereign Credit Support In Asia-Pacific?, Aug. 22, 2021

KimEng Tan, Singapore, + 65 6239 6350, kimeng.tan@spglobal.com

  • Low vaccination rates mean likely resurgences of new COVID cases in some parts of Asia-Pacific in the next year or so. Government measures to suppress new infections will weaken economic growth and fiscal metrics further, in our view.
  • With a few exceptions, we believe that Asia-Pacific sovereigns could absorb this damage at their respective rating levels. Consequently, most sovereign ratings in the region are likely to remain unchanged over the next one to two years. However, sovereigns' fiscal resilience to future shocks could weaken as government debt levels rise further in the continued struggle with the pandemic.
  • The impact of further waves of COVID-19 infections could lower the sovereign ratings that already have negative outlooks, especially if revenue growth disappoints and interest rates rebound by more than we expect. It could also drag on the upward momentum of other sovereign ratings.

132. China Balances Policy Risk With A Need For Reform, Oct. 12, 2021

KimEng Tan, Singapore, + 65 6239 6350, kimeng.tan@spglobal.com

  • Amid continuing external pressures, China has launched or intensified reforms to counter domestic risks ahead of an important party congress next year. These changes represent the most serious policy effort to head off threats to the government's credit fundamentals over the next five to 10 years.
  • The breadth of these changes and the speed at which they have been implemented have increased policy implementation risk and financial volatility. They could also strain growth in an economy that continues to feel the disruptions of the pandemic.
  • The policy changes require strong coordination among Chinese government agencies and significant policy flexibility, with risks to implementation and the possibility of further market and economic disruptions. We believe the government maintains sufficient policy buffers to contain the effect of any volatility.

133. How Has Dubai Fared Amid The COVID-19 Pandemic?, Oct. 19, 2021

Trevor Cullinan, Dubai, + (971)43727113, trevor.cullinan@spglobal.com

  • We expect a modest economic recovery in Dubai this year, supported by the UAE's high vaccine rates and limited COVID-19-related restrictions.
  • However, weak international tourism is likely to drag on the economy until late 2022 at the earliest.
  • The Dubai government's debt burden is sizeable, estimated at about 76% of GDP in 2021, based on publicly available information, while liabilities stemming from nonfinancial government-related entities (65% of GDP) push overall public sector debt to about 141%.

134. Can Egypt Weather Rising Global Interest Rates?, Sept. 5, 2021

Zahabia S Gupta, Dubai, (971) 4-372-7154, zahabia.gupta@spglobal.com

  • Since 2019, a key pillar of Egypt's macroeconomic strategy has been to keep real interest rates (RIRs) high. The benefits of high rates have included robust portfolio inflows, foreign exchange reserve accumulation, and a stable exchange rate.
  • However, high RIRs come at an elevated fiscal cost. Egypt's interest-to-revenues ratio and its interest payments as a percentage of GDP are among the highest of all rated sovereigns.
  • We expect Egypt's foreign currency buffers will mitigate against capital outflows stemming from rising global interest rates in developed markets. But to put debt to GDP on a steeper downward path, Egypt must find a way to pay less on its debt.
  • Even-larger primary surpluses, higher and broader economic growth, and a gradual shift in the external funding mix from debt toward equity flows would allow Egypt to reduce RIRs while maintaining sufficient capital inflows to meet investment needs.

135. Credit FAQ: How The Debt Ceiling And A Potential Government Shutdown Factor Into Our U.S. Sovereign Rating Analysis, Sept. 30, 2021

Joydeep Mukherji, New York, + 1 (212) 438 7351, joydeep.mukherji@spglobal.com

  • S&P Global Ratings continues to monitor developments as a potential U.S. government shutdown looms and the government remains at an impasse over the debt ceiling.
  • With respect to our U.S. sovereign rating analysis, we expect that Congress will address the debt ceiling on time, either raising it or suspending it, understanding that the consequences on the financial markets of not doing so would be severe and extraordinary.
  • In contrast with failing to resolve the debt ceiling issue, a potential government shutdown does not have a direct impact on the sovereign's creditworthiness.
Structured Finance

136. New Features Continue To Appear In European CLOs, Sept. 1, 2021

Abhijit A Pawar, London, + 44 20 7176 3774, abhijit.pawar@spglobal.com

  • Collateralized loan obligations (CLOs) issued in Europe this year have started to again resemble prepandemic deals.
  • Par subordination (the buffer to par that needs to default before a loss occurs) has moved back to the 38%-40% range compared with 42%-44% for CLOs issued last year.
  • Documentation continues to evolve, adding further flexibility for effective management of CLO portfolios.

137. European And Japanese Structured Finance Markets Approach LIBOR Cessation While U.S. Markets Prepare For A Major Shift, Nov. 2, 2021

John A Detweiler, CFA, New York, + 1 (212) 438 7319, john.detweiler@spglobal.com

  • Compared to corporate and bank debt markets, structured finance markets are more sensitive to the LIBOR transition because they generally contain both assets and liabilities tied to this benchmark, not just liabilities, and generally require high investor approval levels to amend bond documents.
  • Pound sterling and Japanese yen LIBOR cessations enter their final phase, ending on Dec. 31, 2021, with 96 structured finance transactions rated by S&P Global Ratings in Europe (mostly in the U.K.) and 19 in Japan tied to this benchmark.
  • We estimate there are about 30 transactions, mainly in the U.K., where LIBOR coupons have not been amended and transition plans have not been announced. The recently announced "synthetic LIBOR" may be the only realistic method for these securities to continue paying debt service.
  • For pound sterling-linked securitizations, amending transactions in 2021 has progressed more quickly on the liabilities than on the assets, with coupon rate changes incorporating the sterling overnight index average rate and some consideration of the Bank of England Base Rate in consumer assets.
  • The U.S. market faces a major shift in 2022 as LIBOR will no longer be permitted in new bank lending. The CLO market is the largest segment with LIBOR exposure and will face some basis risk as assets and liabilities transition to new rates at different times.
  • The New York law passed in April appears helpful for student loan and legacy RMBS sectors but less operative for the large CLO sector where fallbacks are tied to Alternative Reference Rates Committee recommendations or collateral manager rate selection. Federal legislation currently under consideration would likely benefit all sectors by providing clarity to Trust Indenture Act provisions on liability rate changes as well as consistency for LIBOR-linked assets under various state laws.
  • S&P Global Ratings expects issuers with sterling and yen LIBOR exposure to communicate their interest rate transition plans as soon as possible so we are able to assess the likely impact, if any, that LIBOR cessation on Dec. 31 may have on its structured finance ratings.

138. Inside Global ABCP: Stable Ratings And Modest Issuance Growth Likely As Economy Rebounds, Oct. 29, 2021

Dev C Vithani, New York, + 1 (212) 438 1714, dev.vithani@spglobal.com

  • U.S.: New seller activity, additional issuances from existing programs, and the launch of new programs have remained steady in the first half of 2021. Issuance growth should remain stable this year, with no material impact on our ratings in the coming months amid a modest economic rebound.
  • EMEA: The total amount of ABCP outstanding that we rate grew by almost 10% in the first six months of 2021 to reach $116.4 billion in June. Issuance momentum, which gained trat ion in the second half of 2020 due to strong demand for conduits backed by investment contracts, continued into the first half of 2021. We expect that moderate growth will continue this year, with no material impact on our ratings.

139. SF Insights: Non-Traditional ABS, Oct. 5, 2021

Ildiko Szilank, New York, + 1 (212) 438 2614, ildiko.szilank@spglobal.com

  • Year to date (YTD), S&P Global Ratings rated 53 new non-traditional ABS transactions, which is over 145% and 140% of the issuance volume in the first three quarters of 2020 and 2019, respectively.
  • We issued ratings on a solar loan-backed ABS transaction, GoodLeap Sustainable Home Solutions Trust Series 2021-4; a new data center program, Aligned Data Centers Issuer LLC; and a new triple-net program, CMFT Net Lease Master Issuer LLC.
  • YTD, S&P Global Ratings took rating actions on 57 transactions. We affirmed ratings on 39 of these, lowered ratings on three, and raised ratings on 15. We also completed annual reviews on 245 transactions.
  • Environmental, social, and governance (ESG)-related credit rating actions affected two aircraft securitizations, Harbour Aircraft Investments and Merlin Aviation Holdings.

140. U.S. And Canada Structured Finance Chart Book, Sept. 29, 2021

Brenden J Kugle, Centennial, + 1 (303) 721 4619, brenden.kugle@spglobal.com

  • The report includes a round-up of the latest credit developments that we've observed across structured finance sectors, hot topics within structured finance such as LIBOR, ESG, and cyber risks, along with underlying performance indicators.
  • We also highlight the key takeaways from our recent research publications.

141. The Shift From Under To Overvalued: What It Means For U.S. RMBS, Oct. 29, 2021

Jeremy Schneider, New York, + 1 (212) 438 5230, jeremy.schneider@spglobal.com

  • U.S. home prices have made significant gains recently. We have therefore updated the home value assessments we use when evaluating mortgage pools backing certain residential mortgage-backed securities (RMBS).
  • Nationwide, we estimate that housing is about 5% overvalued. However, the picture varies at the state level and by core-based statistical area (CBSA). That is, some states and CBSAs are overvalued while others are undervalued.
  • The impact of home values on a residential mortgage pool is based on the specific CBSAs and their geographic representation in that pool.
Technology

142. .S. Tech Supply Constraints Bite Harder Than Expected, But Customer Appetite Is Still Strong, Nov. 5, 2021

Christian Frank, San Francisco, + 1 (415) 371 5069, christian.frank@spglobal.com

  • U.S. technology sector supply chain constraints will ease only slightly in the new year as capacity additions are not likely to make a significant difference until late 2022.
  • Inflationary pressures are emerging, but we expect higher costs to be passed through.
  • Demand is still robust; we expect it to be delayed, not lost.
  • Sector rating actions will be more balanced following a significant positive bias over the last five quarters, reflecting good trends.

COVID-19 Impact Article Series

Table 1

Coronavirus Impact Article Series
Sector Region/country No. Article title Publication date
Global credit outlook Global 1 Global Credit Outlook 2022: Aftershocks, Future Shocks, And Transitions Dec. 1, 2021
Credit conditions Asia-Pacific 2 Credit Conditions Asia-Pacific: China Slows, A Chill Wind Blows Dec. 1, 2021
Credit conditions Emerging Markets 3 Credit Conditions Emerging Markets: Inflation, The Unwelcome Guest Dec. 1, 2021
Credit conditions Europe 4 Credit Conditions Europe: Reining In As Full Recovery Nears Dec. 1, 2021
Credit conditions North America 5 Credit Conditions North America : As Recovery Rolls On, Inflation Risks Remain Dec. 1, 2021
Autos China 6 China’s Auto Recovery Is Hitting A Speed Bump Oct. 19, 2021
Autos Global 7 Global Auto Sales Forecasts: Supply Disruption Slows Recovery Oct. 19, 2021
Autos U.S. 8 U.S. Auto Sales Forecast Lowered For 2021, With A Bumpy Road In 2022; EVs Gear Up To Expand Share Oct. 14, 2021
Aviation Europe 9 COVID-19 And Inflation Are Clouding European Airlines' Recovery Path Nov. 11, 2021
Chemicals U.S. 10 U.S. Chemical Companies' Post-Pandemic Rebound Has Sparked A Surge In M&A Sept. 30, 2021
Commodities - metals and mining Global 11 S&P Global Ratings Metal Price Assumptions: Choppy Markets Drive Erratic Moves Oct. 11, 2021
Commodities - oil and gas Global 12 S&P Global Ratings Revises Oil And Natural Gas Price Decks Oct. 4, 2021
Consumer Products China 13 China Power Outages Add Dark Clouds To An Already Weakening Consumer Sector Nov. 10, 2021
Consumer Products Europe 14 European Retailers And Consumer Product Companies Will Show Resilience Against Rising Costs Nov. 22, 2021
Consumer Products U.S. 15 Some U.S. Consumer Products Companies Could Fail The Inflation Stress Test Sept. 28, 2021
Corporates China 16 China’s Contagion Risks Rise: Turbulence, Impact, And Transmission Channels Nov. 10, 2021
Corporates China 17 China's Zero-COVID Approach To Aggravate Rising Corporate Risks Sept. 6, 2021
Corporates Germany 18 One-Third Of German Companies Are Behind On New 2045 Net-Zero Deadline Nov. 29, 2021
Corporates Global 19 Supply Chain Strains and Rising Costs Will Pressure Profitability in 2022 Nov. 18, 2021
Corporates Japan 20 Japan Corporate Credit Spotlight: Fragile Stability Faces Three Threats Oct. 21, 2021
Corporates Taiwan 21 Global Recovery And High-Tech Demand Lift Taiwan Corporate Profitability To New Highs Sept. 6, 2021
Credit trends and market liquidity Europe 22 The European Speculative-Grade Corporate Default Rate Could Reach 2.5% By September 2022 Nov. 18, 2021
Credit trends and market liquidity Europe 23 European Corporate Credit Outlook Remains Robust Nov. 10, 2021
Credit trends and market liquidity Global 24 Potential Downgrades Fall While Potential Upgrades Stall Nov. 30, 2021
Credit trends and market liquidity Global 25 BBB' Pulse: The Future Looks Bright As Potential Rising Stars Shoot Up Nov. 24, 2021
Credit trends and market liquidity Global 26 Two Defaults Brings The Corporate Tally To 67 Nov. 18, 2021
Credit trends and market liquidity Global 27 Global Financing Conditions: Bond Issuance Is Expected To Finish The Year Close To 2020 Levels; Drop 2% Next Year Oct. 25, 2021
Credit trends and market liquidity Global 28 Signs Of Weakness Among Lowest-Rated Homebuilder And Real Estate Issuers Oct. 29, 2021
Credit trends and market liquidity Global 29 Why 'CCC' Rated Companies Have Risen And Default Rates Have Not Oct. 19, 2021
Credit trends and market liquidity Global 30 2020 Annual Global Financial Services Default And Rating Transition Study Sept. 14, 2021
Credit trends and market liquidity North America 31 Risky Credits: The Percentage Of Issuers Rated 'CCC' And Below In Europe Is Above North America For The First Time Nov. 8, 2021
Credit trends and market liquidity U.S. 32 Distressed Debt Amount Falls By Over 70% Nov. 12, 2021
Credit trends and market liquidity U.S. 33 The U.S. Speculative-Grade Corporate Default Rate Could Reach 2.5% By September 2022 Nov. 16, 2021
Credit trends and market liquidity U.S. 34 U.S. Corporate Credit Recovery Remains An Uphill Climb Oct. 28, 2021
Credit trends and market liquidity U.S. 35 The Economic Impact Of Default Is Falling As Selective Defaults Rise Sept. 16, 2021
Credit trends and market liquidity U.S. 36 Growing Risks, Diminishing Rewards--Has The U.S. Speculative-Grade Market Hit A Peak? Sept. 9, 2021
Credit trends and market liquidity U.S. 37 No Time For Complacency For The U.S. Speculative-Grade Market Sept. 2, 2021
Cross-sector Asia 38 COVID, China Risks Won't Pass For Years, Say Panelists Sept. 8, 2021
Cross-sector Asia-Pacific 39 Sector Roundup Asia-Pacific Q4 2021: Improved Rating Trend Likely To Wane Sept. 28, 2021
Cross-sector China 40 Global Debt Leverage: Can China Escape Its Corporate Debt Trap? Oct. 19, 2021
Cross-sector China 41 Coal Crunch Won't Leave China's Power Firms In The Cold Oct. 5, 2021
Cross-sector China 42 Evergrande Default Contagion Risk--Ripple Or Wave? Sept. 20, 2021
Cross-sector Emerging Markets 43 Emerging Markets Monthly Highlights : Rising Yields Could Expose Pockets Of Funding Constraints Nov. 10, 2021
Cross-sector Emerging Markets 44 MENA Sovereigns, Corporates, And Banks Enter A New Chapter As COVID-19 Concerns Linger Sept. 7, 2021
Cross-sector Global 45 Decarbonization Efforts Are Shaking Up Global Energy Markets Sept. 28, 2021
Cross-sector Latin America 46 Latin America Looks Past COVID-19 And Sees Political Uncertainty And Old Challenges Oct. 21, 2021
Cross-sector Thailand 47 Thailand Cross Practice Outlook: Downside Risks Remain High Oct. 21, 2021
Economics Asia-Pacific 48 Asia-Pacific: Ghosts Of COVID Past Hover Over 2022 Nov. 29, 2021
Economics Asia-Pacific 49 How Will China's Evolving Economic Model And Energy Strategy Affect Trade With Central Asia? Oct. 18, 2021
Economics Canada 50 Economic Outlook Canada Q1 2022: Economy Set To Expand Strongly, COVID-19 And Inflation Risks Remain Nov. 29, 2021
Economics Canada 51 Canada And Its Provinces: GDP Growth Prospects In The Coming Decade Sept. 14, 2021
Economics Emerging Markets 52 Economic Outlook Emerging Markets Q1 2022: Recovery Isn't Yet Complete While COVID-19 And Inflation Risks Remain Front And Center Nov. 30, 2021
Economics Emerging Markets 53 Economic Outlook EMEA Emerging Markets Q1 2022 High Inflation And COVID-19 Threaten To Slow Recovery Nov. 30, 2021
Economics Emerging Markets 54 Caucasus And Central Asian Economies Look To Commodities And Domestic Demand To Emerge From The Pandemic Nov. 11, 2021
Economics Europe 55 Eurozone Economic Outlook 2022: A Look Inside The Recovery Nov. 30, 2021
Economics Europe 56 Green Spending Or Carbon Taxes (Or Both): How To Reach Climate Targets, And Grow Too, By 2030? Nov. 4, 2021
Economics Europe 57 European Housing Market Inflation Is Here To Stay Nov. 2, 2021
Economics Global 58 Economic Outlook Q1 2022: Rising Inflation Fears Overshadow A Robust Rebound Nov. 30, 2021
Economics Latin America 59 Economic Outlook Latin America Q1 2022: High Inflation And Labor Market Weakness Will Keep Risks Elevated In 2022 Nov. 29, 2021
Economics U.K. 60 Economic Outlook U.K. Q1 2022: Onward And Upward Nov. 30, 2021
Economics U.S. 61 Economic Outlook U.S. Q1 2022: Cruising At A Lower Altitude Nov. 29, 2021
Economics U.S. 62 Labor Force Exit Has The U.S. Economy In A Bind Nov. 22, 2021
Economics U.S. 63 U.S. Real-Time Data: Early Signs Indicate Supply-Side Pressures Are Easing Nov. 15, 2021
Economics U.S. 64 Where Are The Workers? Three Explanations Point To An Answer Nov. 4, 2021
Economics U.S. 65 Lasting Effects Of Temporary Inflation: Higher Prices, Lower Purchasing Power Oct. 28, 2021
Economics U.S. 66 How U.S. Infrastructure Investment Would Boost Jobs, Productivity, And The Economy Aug. 23, 2021
Environmental, social, and governance Global 67 ESG In Credit Ratings Newsletter October 2021 Oct. 21, 2021
Financial institutions Asia-Pacific 68 Asia-Pacific Financial Institutions Monitor 4Q 2021: Evergrande, Southeast Asia Risks, And The Digital Dilemma Oct. 19, 2021
Financial institutions Europe 69 The Resolution Story For Europe's Banks: More Resolvability, Consistency, Credibility Oct. 5, 2021
Financial institutions EMEA 70 EMEA Financial Institutions Monitor 4Q2021: Rebounding Economies Bolster Banks’ Recovery Nov. 5, 2021
Financial institutions Gulf Cooperation Council 71 GCC Banks Hope The Worst Is Over As The Recovery Begins Oct. 5, 2021
Financial institutions Gulf Cooperation Council 72 Government Support And Improving Economic Sentiment Help Mitigate Sector Vulnerabilities For GCC Banks Sept. 26, 2021
Financial institutions Global 73 Top 100 Banks: Capital Ratios Show Resilience To The Pandemic Sept. 28, 2021
Financial institutions India 74 As India's Banks Grow Again, Will Old Mistakes Return? Nov. 29, 2021
Financial institutions Japan 75 Japanese Regional Banks: The Pandemic Bonanza Is A Blip Sept. 26, 2021
Financial institutions Nordics 76 Nordic Banks, Even After Generous Payouts, Should Remain Well Capitalized Oct. 11, 2021
Financial institutions North America 77 North American Financial Institutions Monitor 4Q 2021: Riding The Economy's Tailwind And Aiming For A Smooth Landing Oct. 20, 2021
Financial institutions U.S. 78 U.S. Banks' Growing Balance Sheets May Pose Regulatory Capital Constraints Oct. 11, 2021
Financial institutions Uzbekistan 79 The Outlook For Uzbek Banks Is Stable Despite High Competition And Problem Loans Oct. 7, 2021
Gaming, leisure and lodging Macau 80 Macau Gaming: COVID Remains The Wild Card Nov. 24, 2021
Infrastructure China 81 Riskier China LGFVs Be Warned: Capital Markets May Cut You Off Oct. 6, 2021
Infrastructure Global 82 Infrastructure And Energy Outlook: October 2021 Oct. 5, 2021
Infrastructure - healthcare Canada 83 Infrastructure Post-COVID-19: Funding Canadian Provinces' Rising Health Care Spending Budgets Oct. 19, 2021
Infrastructure - healthcare Canada 84 Canadian Health Care P3s: Robust Performance And Risk Mitigation Outweigh Challenges Oct. 19, 2021
Infrastructure - transportation Global 85 Airports Face A Long Delay To Global Air Traffic Recovery Sept. 24, 2021
Infrastructure - power and utilities China 86 China's Power Outages--Get Used To It Oct. 18, 2021
Infrastructure - power and utilities China 87 China's Gas Distributors Won't Get Burned By Higher Costs Oct. 7, 2021
Infrastructure - power and utilities Europe 88 Price Tremors Threaten Europe's Gas Bridge Oct. 5, 2021
Infrastructure - power and utilities Europe 89 Fit for 55: The Gains (And Pains) For European Utilities Sept. 29, 2021
Infrastructure - power and utilities Spain 90 Spain's Plan To Claw Back Billions From Utilities Could Stunt Renewables Growth Sept. 29, 2021
Infrastructure - power and utilities U.K. 91 The Energy Price Crisis: Examining The Impact On U.K. Suppliers Sept. 30, 2021
Infrastructure - power and utilities U.S. 92 A $1 Trillion Infrastructure Plan: Credit Perspectives For U.S. Investor-Owned Regulated Electric Utilities Nov. 9, 2021
Insurance Asia-Pacific 93 Asia-Pacific Reinsurers: More Volatility To Come As Risks Evolve Nov. 4, 2021
Insurance Australia 94 Lockdowns Give Australian Health Insurers Profit Bump Sept. 1, 2021
Insurance EMEA 95 EMEA Insurance Outlook 2022 : Fighting Fit For 2022 Nov. 16, 2021
Insurance EMEA 96 EMEA Insurance Monitor: November 2021 Nov. 8, 2021
Insurance EMEA 97 Top 40 EMEA Insurers Remain Resilient To Lingering Pandemic Risks Aug. 26, 2021
Insurance Global 98 Global Reinsurance Highlights 2021 Navigating Uncharted Waters Nov. 17, 2021
Insurance Global 99 The Global Reinsurance Sector Outlook Remains Negative As Returns Fall Short Oct. 28, 2021
Insurance Global 100 Cyber Risks In A New Era: Reinsurers Could Unlock The Cyber Insurance Market Sept. 29, 2021
Insurance Netherlands 101 Dutch Insurers Remain On Sound Financial Footing Despite The Pandemic Sept. 9, 2021
Leveraged finance Europe 102 European Leveraged Finance And Recovery Third-Quarter 2021 Update: Hitting The Wall After The Sprint To Midyear Nov. 16, 2021
Leveraged finance U.S. 103 U.S. Leveraged Finance Q3 2021 Update: Leverage Is Getting Better (Almost) All The Time Oct. 21, 2021
Leveraged finance U.S. 104 The S&P/LSTA Leveraged Loan Index Default Rate Is Expected To Reach 1% In June 2022 Sept. 2, 2021
Media and entertainment U.S. 105 Rebooting The U.S. Media Sector: Double-Digit Advertising Growth Can Thank Digital Sept. 1, 2021
Media and entertainment U.S. 106 U.S. Media And Entertainment Industry Check-In Sept. 1, 2021
Public finance Argentina 107 Argentine Provinces Will Have To Navigate Rough Waters To Remain Afloat Nov. 11, 2021
Public finance Australia 108 Australian States Embark On The Recovery Path Nov. 28, 2021
Public finance Canada 109 As Canadian Municipalities Negotiate A New Landscape, Prudent Management Remains Crucial Nov. 8, 2021
Public finance Canada 110 Canadian Local And Regional Government Debt: Economic Recovery And Sound Fiscal Management Are The Keys To Debt Stabilization Sept. 8, 2021
Public finance China 111 China Local Governments: Higher For Longer Fiscal Imbalances Nov. 22, 2021
Public finance China 112 China's Falling Land Sales Will Press Change On LGFVs Nov. 10, 2021
Public finance China 113 China Property Strains Will Roll Off Local Governments, And Land On Their SOEs Nov. 10, 2021
Public finance China 114 China's Local Governments Will Address Evergrande--Quietly, Behind The Scenes Oct. 5, 2021
Public finance France 115 French LRGs Start The COVID Recovery On Solid Footing Sept. 6, 2021
Public finance Global 116 Local And Regional Governments Outlook 2022: Long-Term Challenges Resurface As The Pandemic Eases Nov. 17, 2021
Public finance U.S. 117 Pension Pressure Lingers For Largest U.S. Cities Despite Federal Stimulus Nov. 29, 2021
Public finance U.S. 118 For U.S. Public Power And Electric Cooperatives, There Are Hurdles On The Path To Decarbonization Nov. 8, 2021
Public finance U.S. 119 Cyber Risks In A New Era: Utilities Are Cyber Targets And Need To Plan Accordingly Nov. 3, 2021
Public finance U.S. 120 Texas Winter Storm Brought Downgrades And Spurred Response Among Public Power And Electric Cooperative Utilities Nov. 1, 2021
Public finance U.S. 121 Online Sales Tax Collections Continue To Grow; Helped Offset Pandemic Declines Last Year Oct. 28, 2021
Public finance U.S. 122 Cyber Risk In A New Era: Are Third-Party Vendors Unwitting Cyber Trojan Horses For U.S. Public Finance? Oct. 25, 2021
Real estate China 123 China Property Watch: Strains In The Key Of 'B' Oct. 27, 2021
Real estate China 124 China Developers Battle Tight Liquidity And Plummeting Profitability Sept. 5, 2021
Real estate Dubai 125 Real Estate Recovery To Be Uneven In Dubai Oct. 11, 2021
Real estate Hong Kong 126 Hong Kong Retail Properties Take The Baton In Recovery Relay Oct. 27, 2021
Real estate Indonesia 127 Indonesia Developers: Improved Sales Support Stabilizing Credit Quality Nov. 15, 2021
REITs North America 128 REITrends: North American REITs Stay The Recovery Course With Solid Second-Quarter Trends Sept. 1, 2021
Retail and restaurants U.S. 129 Holiday 2021 Sales Outlook: Santa's Bag Is Filled This Holiday Season, Thanks To Deep Consumer Pockets Nov. 23, 2021
Retail and restaurants U.S. 130 Labor And Supply Chain Woes Chill Retail Spirits For Holidays And Beyond Sept. 28, 2021
Sovereigns Asia-Pacific 131 Will COVID-19 Waves Wash Away Sovereign Credit Support In Asia-Pacific? Aug. 22, 2021
Sovereigns China 132 China Balances Policy Risk With A Need For Reform Oct. 12, 2021
Sovereigns Dubai 133 How Has Dubai Fared Amid The COVID-19 Pandemic? Oct. 19, 2021
Sovereigns Egypt 134 Can Egypt Weather Rising Global Interest Rates? Sept. 5, 2021
Sovereigns U.S. 135 Credit FAQ: How The Debt Ceiling And A Potential Government Shutdown Factor Into Our U.S. Sovereign Rating Analysis Sept. 30, 2021
Structured finance Europe 136 New Features Continue To Appear In European CLOs Sept. 1, 2021
Structured finance Global 137 European And Japanese Structured Finance Markets Approach LIBOR Cessation While U.S. Markets Prepare For A Major Shift Nov. 2, 2021
Structured finance Global 138 Inside Global ABCP: Stable Ratings And Modest Issuance Growth Likely As Economy Rebounds Oct. 29, 2021
Structured finance Global 139 SF Insights: Non-Traditional ABS Oct. 5, 2021
Structured finance North America 140 U.S. And Canada Structured Finance Chart Book Sept. 29, 2021
Structured finance U.S. 141 The Shift From Under To Overvalued: What It Means For U.S. RMBS Oct. 29, 2021
Technology U.S. 142 U.S. Tech Supply Constraints Bite Harder Than Expected, But Customer Appetite Is Still Strong Nov. 5, 2021

This report does not constitute a rating action.

Primary Credit Analyst:David C Tesher, New York + 212-438-2618;
david.tesher@spglobal.com
Secondary Contacts:Terry E Chan, CFA, Melbourne (61) 3-9631-2174;
terry.chan@spglobal.com
Jose M Perez-Gorozpe, Mexico City (52) 55-5081-4442;
jose.perez-gorozpe@spglobal.com
Paul Watters, CFA, London (44) 20-7176-3542;
paul.watters@spglobal.com
Contributors:Joe M Maguire, New York (1) 212-438-7507;
joe.maguire@spglobal.com
Yucheng Zheng, New York + 1 (212) 438 4436;
yucheng.zheng@spglobal.com
Lekha Prabhakar, Mumbai;
lekha.prabhakar@spglobal.com

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