Many APAC corporate sectors could be affected by the Middle East conflict through higher oil and gas prices, disruptions to shipping and supply chains, weaker demand and delayed recovery from cyclical troughs, Fitch says in its inaugural ‘APAC Corporates Credit Trends Monitor’. The medium-term effect of the war is unclear, but it could have lagging consequences on the economy and corporates in 2H26 even after it ends, as the energy market, global supply chains and consumer sentiment could take time to normalise.
In addition, APAC corporates continue to be affected by various developments that could impact their credit profiles. Ongoing geopolitical tensions, sanctions and tariff uncertainty continue to affect supply chains, trade flows and pricing across multiple sectors. “China+1” strategies and intra-Asian trade growth are shifting production towards Vietnam, Malaysia, India and Indonesia.
There is also growth divergence within the region, with weak domestic demand, persistent price competition and excess capacity in China, putting pressure on companies in the consumer, industrial, chemicals, building materials and automotive sectors. By contrast, India and parts of Southeast Asia benefit from stronger domestic growth, infrastructure spending and more resilient household consumption, supporting better credit trends in sectors linked to local demand.
Despite the adverse environment, we expect EBITDA margins to be resilient and increase above 15% on an aggregate basis for our portfolio of APAC issuers, compared with 14%-14.5% in 2023-2025. Strengthening EBITDA margins combined with moderating capex in some sectors should lead to improvement in aggregate free cash flow (FCF) generation in 2026, although FCF margin will remain negative at around -1.5%, from -2% in 2025. Main risks to this projection include higher energy costs and commodity prices, which could remain above the pre-conflict level well into 2H26
