Global Arab Network | Europe, Middle East and Africa: Emerging Markets to Lead Corporate Capex Spending in 2010

Translate this article to your language:

GANPublications

e-Publications

Add Site to Favorites

Add Page to Favorites

Make Homepage

Share This Page

RSS Feed

--------------------------------------------------------------------------------------------------------------------
| |

Europe, Middle East and Africa: Emerging Markets to Lead Corporate Capex Spending in 2010

Global Arab Network - - Rabih Serrai

Monday, 01 February 2010 14:37

Fitch Ratings says that, compared to their developed market peers, it expects emerging market corporate issuers across the EMEA region to increase capital expenditures in 2010 as they become more optimistic about growth prospects for their businesses, buoyed by improving economic prospects. No meaningful change is expected for the investment plans of corporate issuers in the developed markets, aside of property and construction, where investment levels are expected to decline further.

"To a large extent, Emerging Market corporate capital expenditure plans reflect issuers' expectations of the growth prospects for their businesses," said Raymond Hill, Fitch's Head of Emerging Market Corporates, EMEA region. "However, to some extent, the investment outlook will also reflect the availability of credit and the creditworthiness of particular industries and issuers, with capital-constrained banks having become more selective," added Mr. Hill. Through the current downturn credit providers have tended to favour issuers with more stable business profiles such as energy, utilities and other infrastructure.

Fitch's forecasts for its portfolio of 107 rated emerging market corporate issuers across the region indicate an aggregate increase in investment of 14% for 2010, with investment levels currently expected to remain of a similar magnitude in 2011. In contrast, Fitch's expectations for corporate issuers in developed markets are for a small decline in capital expenditures in 2010, followed by a low single digit percentage increase in 2011. Investment levels are expected to increase across the board in emerging markets in 2010 with property and construction being the only sector where investment levels are likely to decline. Total capital expenditures are expected to rise from an expected USD98bn for 2009 to USD112bn for 2010.

For the EMEA region, Fitch's sovereign group expects to see most emerging economies achieving GDP growth in 2010, including 4.5% for Russia, 3% for Ukraine and Kazakhstan and 4% for Turkey.

Overall capital expenditures for emerging market corporate issuers are expected by Fitch to have declined by 8% in 2009 against the expectations of a GDP decline of -6.2% for Emerging Europe and 0.9% growth for the Middle East and Africa. Whilst sectors such as telecommunications, manufacturing and basic materials reduced capital expenditures significantly in 2009 sectors such as utilities and transport increased investment levels, reflecting the longer term investment needs for infrastructural investment across emerging markets.

In terms of analysis by sector of the rated corporate sample, 55% of expected capital expenditure in 2010 is attributable to the oil & gas sector, 20% to the transport sector, 10% to TMT, 8% to utilities, 6% to basic materials, with minimal investment levels expected in other sectors.

Whilst current expectations are for 2011 to see similar investment levels to 2010 a more positive economic growth outlook than currently forecast may see sectors such as basic materials, manufacturing and consumer increase their investment plans in anticipation of rising demand. Such a trend may contribute to a rise in near-term leverage levels which would need to be monitored in terms of potential rating impact. However, current rating levels are viewed as reasonably insulated against modest rises in investment levels if supported by growth.

Global Arab Network

< Prev		Next >

Add comment

The opinions of the authors in articles published are theirs alone and do not necessarily reflect the views of Global Arab Network
------------------------------------------------------------------------------
Published comments are the opinions of private individuals and do not reflect the views of Global Arab Network