Coface sees increased debtor risk in Asia Pacific

Coface, the international credit insurer, says in its latest review that some key indicators have revealed signs of a slight deterioration in the Asia Pacific economy. Firstly, overdue debtor accounts have become more common for more respondents, with 69.9% experiencing overdue accounts during 2014, compared to 67.7% in 2013 and 67.5% in 2012.

Secondly, a slightly higher percentage of respondents reported the average length of overdue periods to be longer than 90 days at 14.8%, marginally higher than 14.5% in 2013 (13.2% in 2012). In addition, 36.8% of respondents said overdue amounts increased over the last year, compared to 34.7% in 2013. This data may point to deteriorated payment experiences in the region, says Coface.

It appears that companies were less frequently troubled by ultra-long overdues (i.e. overdues of over 180 days). Only 24.9% of respondents reported that these ultra-long overdues weighed more than 2% of their annual turnover (sales). This is noticably lower than the 29.6% and 37.2% reported in 2013 and 2012 respectively. As these ultra-long overdues are quite likely not to be paid, the reduction of reported issues is seen as a positive development.

Australia has shown a marked improvement in corporate payment experience which saw improvements in terms of overdue occurrences and the length of average overdue accounts. In addition, Taiwan and Singapore saw improved payment trends in 2014. Insolvency trends and business closures in Taiwan and Singapore also remained at low levels.

Several indicators suggest that corporate risk in Hong Kong may be on the rise. In 2014, overdues became more common and more companies reported that average overdue periods extended to over 90 days. Cases of insolvency rose by 3.1% Y-o-Y in 2014, reaching a level that was last seen in 2010 when the city was hit by the global financial crisis.

In addition, the city’s economic activities are tied to China and recent developments – including, but not limited to, the anti-parallel traders activities in Hong Kong and trends of Chinese travelers visiting other destinations – may negatively impact businesses in the special administrative region. These uncertainties are clouding Hong Kong’s economy.