Singapore’s commodities-related defaults could be a harbinger of deepening Asian financial troubles.
Despite a modest rebound in resource prices, restructuring specialists including KPMG and Hogan Lovells Lee & Lee see more Asia-Pacific commodities and shipping companies being pushed into delinquency, Bloomberg reports.
Law firm DLA Piper said there could be choppy waters ahead on rising interest rates and President-elect Donald Trump’s overhaul of trade with China.
Regional non-bank borrowers face US$76.4 billion of dollar bonds maturing in 2017, 24 percent more than this year, Bloomberg-compiled data show.
While oil prices have jumped 17 percent since Trump was elected, they are about half what they were in 2014.
Resource prices as a whole are down 64 percent from their peak before the 2008 global financial crisis, the Bloomberg Commodity Index shows.
Singapore, whose economy relies on shipping and oil service firms, was exposed first because the companies were smaller and less able to tap government support.
“Singapore is a bellwether for the larger ASEAN and Asian region,” said Andy Ferris, Singapore-based partner at Hogan Lovells Lee & Lee.
“Some of the fundamental problems those industries face won’t go away. Many of the companies in the commodities sector have high levels of debt and depressed revenues.”
Five companies in the city, including oil services firms Swiber Holdings Ltd. and Swissco Holdings Ltd., defaulted on nearly S$1 billion (US$691 million) of bonds in 2016.
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