(The following statement was released by the rating agency) HONG KONG/LONDON/SINGAPORE, December 08 (Fitch) Geopolitical risks have become much more significant for Asia-Pacific credit investors while sentiment concerning the region's macroeconomic stability remains generally positive, according to Fitch Ratings' 2014 APAC Senior Fixed-Income Investor Survey. Geopolitical risk was seen as a 'high' risk to credit markets by 79% of respondents in November 2014, a big jump from only 15% in Fitch's inaugural APAC survey in August 2013. This is broadly in line with a similar result from Fitch's latest quarterly European survey where 85% of respondents highlighted geopolitics as a 'high' risk. The investor focus has clearly switched to so-called "tail risks" during a period of reduced volatility in most financial asset markets. The results may speak to broader investor concern over high-profile global sources of risk such as the protracted crises in Ukraine, Iraq and Syria, rather than regional Asian issues. In Asia, inter-state tensions in the South China Sea, disputes between China and Japan, and between North and South Korea have remained in the background in 2014. However, domestic political risks have also been highlighted in Thailand following the military takeover of the government in May, and by the outbreak of protests in Hong Kong.

Fitch has highlighted risks associated with North Korea as a credit and rating weakness for the South Korean sovereign, though the agency believes that the risk of a military conflict is remote. In Thailand, the coup itself was not an immediate ratings trigger, and Fitch believes that the economy is reasonably well-positioned to rebound quickly from short, negative shocks. But the deep social divisions in the country are a concern over the long term. Without a sustained, stable government, there are risks that Thailand will risk slipping behind its peers in terms of growth and development. Similarly, Fitch has not seen the protests in Hong Kong as a ratings trigger. However, the agency highlights the possibility that failure to resolve the tensions in Hong Kong impair the government's ability to define and implement policies to address long-term challenges. Fitch's investor survey also indicated a generally positive level of confidence in the stability and positioning of the region's economies despite the high level of concern over geopolitical risks. Only 36% of respondents are concerned that the Fed ending quantitative easing will have a negative impact on the stability of emerging Asian markets, with 45% saying that the region's fundamentals will allow it to manage the monetary transition. Furthermore, only a minority of 23% viewed a China "hard landing" as a high risk to credit markets. Failure to implement structural reforms in Asian countries was also viewed as a low risk by 64% of respondents, suggesting a general confidence in economic policy programmes. Fitch's core macroeconomic view for China has long been for a gradual adjustment, with GDP growth forecast to slow to 6.5% by 2016. However, we have also highlighted that China's current investment-driven growth model is unsustainable and that the country has a debt problem. As the country rebalances, the risks of more macroeconomic volatility should be expected - and a smooth outcome is not assured. More generally in the APAC region, the macroeconomic positions of the major economies have strengthened over the past several years, and Fitch believes most are either relatively well positioned for a US interest rate rise or shock, or at least better positioned than in 2013. Many emerging Asian economies have seen their external funding needs decline since 2012, thus mitigating their vulnerability to the expected inflection in US monetary policy. The full report of the 2014 APAC Senior Fixed-Income Investor survey will be published on 15 December. Contacts: Andrew Colquhoun Senior Director Sovereigns +852 2263 9938 Fitch (Hong Kong) Limited 2801 Tower Two, Lippo Centre 89 Queensway Hong Kong Monica Insoll Managing Director Credit Market Research +44 20 3530 1060 Justin Patrie Senior Director Fitch Wire +65 6796 7232 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@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. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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.