Standard & Poor's sees more mergers and acquisitions in Southeast Asian countries

MANILA, Philippines - Standard & Poor’s (S&P) expects more mergers and acquisitions among energy and telecommunication firms in Southeast Asian countries including the Philippines this year and in 2010 on the back of the improving global conditions and in anticipation of better prospects next year.

 “We expect mergers and acquisitions across the region, particularly among energy, telecom and commodities-related players, given their strong appetite for expansion, the importance of economies of scale, and increased foreign interest in the region,” S&P credit analyst Yasmin Wirjawan said in a report titled “Signs of Easing Pressure for ASEAN Companies, But Caution Remains.”

S&P said said there are indications of a turnaround in companies’ profitability in the second quarter of the year among countries in the Association of Southeast Asian Nations (Asean).

It expects companies to have emerged better in the second quarter of the year on the back of the improving global economy and easing credit markets.

The global debt watcher said recovery comes largely from companies’ easier access to credit and less exposure to “currency risk volatility.”

“We expect the region to recover gradually, given less exposure to currency risk volatility, opportunistic investment flows, asset bubbles, and troubled assets,” said Wirjawan.

However, the debt watcher warned that it is too early to say whether a sustained recovery is already underway, saying that the global financial crisis isn’t over yet.

“Major Asean countries are still heavily reliant on international trade and capital flows, particularly with the United States, Europe, and the larger Asia-Pacific economies. Despite the uncertainties, we expect the pace of downgrades to slow in the second half of 2009,” Wirjawan said.

S&P expects the shipping and the real estate development sectors to continue having a difficult time recovering from the economic slump.

On the other hand, S&P expects improvements in consumer-related, energy, and commodities sectors in the second quarter.