...Our net outlook bias has improved significantly in the last year, and now indicates good credit stability in the next year or two defended by solid demand, improving earnings, and generally consistent financial policies. Only 16% of ratings in capital goods around the world have a negative outlook or CreditWatch. Asia-Pacific (APAC) has the most negative bias, with about 40% of the portfolio on negative outlook or CreditWatch negative, followed by North America at roughly 15%. Net negative bias in APAC is higher than the global aggregate despite earnings recovery. The pace of recovery is slower than what we had anticipated due to the pandemic, with lower vaccination rate, lockdowns in Asia, and slower recovery in some end markets. However, the rapid deterioration of the bias lies in company specific issues such as large acquisitions (like Hitachi Ltd.), or governance issues (like Shanghai Electric (Group) Corp., Toshiba Corp). The strong net negative bias will likely continue for the time...
