SINGAPORE, July 22: Standard & Poor's Ratings Services sees a "positive bias" in sovereign credit quality and credit rating actions in the Asia-Pacific region, according to a report released on Thursday.

The rating outlooks on five sovereigns are positive, namely China, Thailand, Pakistan, Indonesia, and the Cook Islands. The report, entitled "Asia-Pacific Report Card, August 2004" also provides updates on credit developments in each of the 18 rated sovereigns in the region.

The region's economic recovery, which began in mid-2003, has continued into 2004. Revival in domestic demand - both consumption and investment - has occurred across most of Asia Pacific. This comes on top of ongoing robust export growth, partly stemming from intra-Asia trade from a booming China. Recent global and regional developments, however, have cast a shadow on the region's growth prospects.

"A worsening security situation in the Middle East could sustain high oil prices, affecting trade, cost, and inflation in Asia Pacific," said Standard & Poor's credit analyst Ping Chew, director in the Asia-Pacific Sovereign & International Public Finance group. "Growth could decelerate, but is unlikely to be derailed," Mr Chew noted.

Uncertainty over economic policies still exists in India, Taiwan, Korea, Sri Lanka, and the Philippines, where elections have already been concluded. Some polls have yet to be conducted, including that for Taiwan's parliament. Results could also affect economic and political stability.

Nevertheless, Mr Chew noted that so far this year, the electoral processes in emerging Asia have proceeded remarkably smoothly. "At the beginning of the year, we feared that the elections in a number of Asia's democracies would give rise to civil disturbances that might derail consolidation of economic and fiscal conditions.

So far, however, the democratic process has been orderly, such as in Indonesia, even if there have been some surprising or contentious outcomes, such as in India and Taiwan," he said.

Since the previous "Asia-Pacific Sovereign Report Card" was published in February 2004, Standard & Poor's has raised the ratings on China, and revised the outlooks on Indonesia to positive from stable, and Japan and Hong Kong to stable from negative.-Reuters