The organisation speculates on the credit rating implications if the virus drags out beyond the first quarter of this year.

Credit ratings on Asia-Pacific region debt issuers could be hit if the COVID-19 virus, aka coronavirus, drags on beyond the first quarter of this year, Fitch Ratings said in a regional report.

Refinancing risks will increase for a number of issuers, the organisation said in a statement. 

Fitch Ratings' Economics team has outlined a scenario where, if the epidemic in China is not contained until well into the second quarter of 2020, China's real gross domestic product growth would slow down in the first quarter of this year to a year-on-rate of 3 per cent. The subsequent recovery would also be delayed, but supported by policy easing, keeping annual growth above 5 per cent.

The impact on Chinese growth could be stronger if the outbreak takes longer to bring under control, or if the disruption has lasting effects that drag on the subsequent recovery, although this falls outside Fitch's baseline expectations. For example, widespread business failures and job losses could mean that it takes longer for the economy to get back to its previous growth path, and may increase the risk that this short-term shock becomes more structural, Fitch said.

The rating agency’s comments came at the end of a week that produced big drops in global equity markets. For example, the MSCI Emerging Market ASEAN Index of equities in Southeast Asia is down by 12.5 per cent since early January. The MSCI World Index of developed countries’ shares fell by 7.5 per cent over that period (figures are in dollars). 

Fitch warned that a “substantial easing” of credit policy by Chinese authorities could make it harder for the country’s government to cut financial sector risks. It will also increase the Chinese government's debt ratios and contingent liabilities which are already large.