Companies in the automotive, steel, chemicals and commercial services in South and South-East Asia face significant exposure to American policies, including higher rates that could increase costs and reduce demand, said Moody’s notes in a March 17 report.
On the other hand, industries such as mining, oil and gas, shipping, investment portfolio companies and agriculture are less vulnerable to these commercial measures, thanks to solid domestic operations, diversified supply chains or direct American operations, noted the rating agency.
Auto parts suppliers and car manufacturers selling in the United States – directly or via Canada and Mexico – would be struck by prices. However, the extent of the impact depends on the share of the cost they can transmit to consumers. Moody’s expects the manufacturer of automotive parts Samvardhana Mother International Ltd. Transforms higher costs on customers, but Tata Motors Ltd. may have trouble doing it. Jaguar Land Rover, the subsidiary of Tata Motors, draws nearly a third of its sales from the United States and could see the demand fall if the prices are increasing, especially since all JLR vehicles sold in the United States are produced in the EU or the United Kingdom-the regions that could also face higher prices.
Steel and chemical companies will see a minimum of direct effects of the proposed American tariffs, but could suffer from an influx of excess steel and petrochemicals in Asia, aggravating the already high offer and depress prices. For JSW Steel LTD, the impact is somewhat amortized because its American operations only contribute 7% of income. Likewise, geographically diverse operations of UPL Corp LTD should help absorb the impact.
Indian IT companies such as Tata Consultancy Services LTD (TCS) and Infosys LTD are well positioned to manage the costs of changing American policies, thanks to their high profitability. However, the sector remains exposed to changes in American immigration rules, which could reduce the talent basin for companies that rely on foreign workers. To mitigate the risks, companies such as TCS, Infosys and Hexaware Technologies Ltd. increased hiring on the ground in the United States.
Meanwhile, climbing commercial restrictions could slow global growth, reduce energy demand and lower prices for raw materials, warned Moody’s. This could weigh on mining and oil and gas companies. Reliance LTD., which exports about half of its chemical oil production, could face indirect risks of world trade disturbances. However, its solid assessment should absorb any drop in demand or profits. Ordal and Natural Gas Corp. LTD., which mainly serves the Indian market, remains protected from direct pricing impacts.
Sectors such as real estate development, real estate investment trustee, telecommunications and games are largely isolated from American policy changes, because their businesses are mainly domestic, added Moody’s.
