March 9, 2016 / 4:27 PM / 2 years ago

Fitch: Europe Credit Investors More Nervous on a Range of Risks

(The following statement was released by the rating agency) LONDON, March 09 (Fitch) European credit investors have grown more bearish on a range of perceived risks to their market in 2016, according to Fitch Ratings' latest senior investor survey. A higher proportion of respondents said the risk to European credit markets from prolonged economic weakness, eurozone sovereign debt problems, geopolitics and emerging markets (EMs) was high than in our previous survey, conducted last October. Seventy-seven percent of respondents said the risk from prolonged economic weakness was high, more than double the 36% who saw high risks from a prolonged recession in 4Q15 and the highest reading in three years. The same proportion saw the threat from geopolitical risk as high, up from 55%. Sixty-five percent cited adverse EM developments as a high risk, up from 59%. A smaller proportion of investors are concerned about eurozone sovereign debt problems, with 31% rating them as a high rather than a low risk in our 1Q16 survey. However, that is nearly double the proportion (16%) that saw them as a high risk in 4Q15. Only 19% of respondents see withdrawal of central-bank credit market easing/QE as a high risk, compared with 23% in our previous survey. This is the only risk for which the proportion of respondents rating it high has fallen since 4Q15, probably reflecting the widespread expectation that the European Central Bank will announce additional stimulus measures at tomorrow's meeting. The ECB said in January that that it would "review and possibly reconsider" its monetary policy stance in March due to falling longer-term inflation expectations. Increased anxiety among European credit investors about other risks would be consistent with the "risk-off" sentiment seen in financial markets during our 7 January-12 February survey period. Volatility, a sell-off in risk assets and flows into safe havens at the start of the year were driven by inter-related concerns over growth, commodity prices, emerging-market vulnerabilities and policymakers' ability to respond. Respondents are not uniformly negative on the outlook for the world economy this year, however. Fifty-three percent of our survey respondents described themselves as bearish, citing the EM debt overhang and policy headwinds, but 47% say they are cautiously optimistic, because stronger developed market growth will offset an EM slowdown. In Fitch's latest Global Economic Outlook, published on Monday, we cut our real GDP growth forecasts for 18 of the "Fitch 20" largest advanced and emerging-market economies, as the investment slowdown in China and sharp expenditure compression in major commodity-producing countries continue to reverberate. However, we do not forecast a global recession (we see the world economy growing by 2.5% this year). Healthier labour markets and lower oil prices support consumer spending across the advanced economies, and many appear to be beyond the worst of the private-sector deleveraging that held back domestic demand in recent years. The Fitch Ratings Senior Fixed-Income Investor Survey was established in 2007 and this is the 30th edition. This survey garnered 64 responses, representing the views of managers of an estimated EUR8trn of fixed-income assets. <a href="https://www.fitchratings.com/web_content/pages/lon_des/investor_survey/ind ex.html">Click here for the full interactive report, European Senior Fixed-Income Investor Survey 1Q16, which is available at www.fitchratings.com. Contacts: Monica Insoll Managing Director Credit Market Research +44 20 3530 1060 Fitch Ratings Limited 30 North Colonnade London E14 5GN Brian Coulton Managing Director Chief Economist +44 20 3530 1060 Mark Brown Senior Director Fitch Wire +44 20 3530 1588 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Related Research Global Economic Outlook here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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