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Taiwan may avoid credit crisis: CSIS

Most Taiwanese companies are likely to feel the impact of sluggish demand on their profitability, but this would not lead to an imminent credit crisis, a Taipei-based think tank said in a report yesterday.

China Credit Information Service Ltd’s (CCIS, 中華徵信所) view may come as good news to jittery investors.

“Local corporations have developed ways to cope with macro slowdowns since the last financial crisis in 2004. It would be premature now to forecast a large-scale credit crunch,” CCIS said in its annual credit check report.

The report showed more than 1,000 Taipei-listed companies were facing tight credit conditions because of deteriorating stock markets and global economic weakness.

However, that figure is a slight improvement as a CCIS indicator fell to 5.3 percent in the first eight months of the year.

The report said the indicator had soared to 5.6 percent last year, its highest point in five years.

“The results indicated that a macro-economic downturn and turbulent stock markets are exerting a weaker impact on locally listed companies than they did in 2007,” CCIS said.

Since the beginning of the year, the TAIEX has plunged 26 percent to 6052.45 points yesterday, making the local market a laggard behind its major Asian peers.

The CCIS credit indicator is composed of 32 factors, including the ability to repay debts, profitability, liquidity and business outlook.

Since local corporations are more experienced at tackling financial disorder the latest downturn could result in declining profits, rather than a credit crisis or factory shutdowns, CCIS said.

But it urged the government to take precautions against credit deterioration in small and medium- sized firms, which are vulnerable to drastic changes in the macro-economy and capital markets.

Local firms face tightening credit as the CCIS indicator for the major companies climbed to a six-year high of 12 percent in the January-August period, compared to 10 percent for all of last year.
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