Moodys Investors Service said in a recent report that rated ports in the Asia Pacific are well-positioned to withstand the impact of the ongoing US-China trade tensions, even in a scenario where a further escalation results in higher tariffs.
In its report "Ports - Asia-Pacific: Scenario Analysis: Potential US-China trade outcomes have differentiated impact," the American credit rater analyzed the impact on rated ports in the region of three scenarios – (1) Moody's current baseline of tensions persisting but not escalating (45% probability), (2) a hardened stance (45%), and (3) a significant softening (10%).
Ports most exposed to China, most vulnerable
"Throughput growth is set to slow under all three scenarios, although at different rates, but the diversity of their operations and ability to take countermeasures provide rated port operators with a buffer against even the impact of escalating trade tensions," said Ray Tay, a Moody's senior vice president.
Moody's also noted that Asia Pacific ports "most exposed to China trade" are also "most vulnerable to a potential escalation of trade tensions," according to Ian Lewis, an associate managing director in Moody's public project and infrastructure finance group.
"However, our rated portfolio benefits from mitigating factors, such as portfolio diversification and financial headroom, that will help support their credit quality," he added.
Nevertheless, despite the risks, Moody's said operators with key gateway port assets in China could become more directly affected if escalating trade tensions or unexpected trade policies substantially erode their competitive edge and financial buffers.
All three scenarios assume the relocation of some manufacturing capacity, although Moody's regards a shock adjustment is unlikely, due to the difficulty for a near-term massive relocation of manufacturing capacity. This gradual shift will allow affected ports to take action to mitigate the impact.
Moody's rated portfolio of nine port operators in the Asia Pacific has a stable investment-grade credit quality, despite the ongoing trade tensions and slower global growth.
