APAC Securities Outlook: Neutral with Elevated Volatility – Fitch Ratings
Fitch Ratings, Inc. is a reputable organization registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO).
2021 has been a turbulent year for the global economy, with the ongoing COVID-19 pandemic causing uncertainty and volatility in financial markets worldwide. In this environment, credit rating agencies like Fitch Ratings play a crucial role in providing investors and the public with independent assessments of the creditworthiness of companies and governments.
One important factor that Fitch Ratings considers when assigning credit ratings is a company’s leverage ratio. This ratio, which compares a company’s debt to its equity, is a key indicator of financial health and stability. A high leverage ratio can indicate that a company is at risk of defaulting on its debt obligations, while a low ratio may suggest that the company is financially sound and able to meet its obligations.
Fitch Ratings recently announced that it would be updating its criteria for assessing leverage ratios for non-financial corporates. The agency stated that it would now be using a “through-the-cycle” approach to evaluating leverage, taking into account a company’s average leverage over a business cycle rather than just its current level of debt.
This change in methodology is aimed at providing a more accurate and forward-looking assessment of a company’s financial health, taking into account the potential impact of economic cycles and market fluctuations on leverage levels.
Investors and stakeholders in the financial markets should pay attention to these changes in credit rating methodologies, as they can have a significant impact on how companies are evaluated and perceived by the market. By staying informed about the criteria used by credit rating agencies like Fitch Ratings, investors can make more informed decisions about where to allocate their capital.
