"As for Asia credit overall, the flat or slower growth for most Asian economies in 2016 and capital flow volatility will weigh on the region's rated debt issuers, particularly in the corporate sector," Moody's V-P and Senior Research Analyst Rahul Ghosh said in a statement.

weak growth and commodity price declines will gang up with foreign currency volatility to raise credit risk across the region, Ghosh said.

"Asia's credit markets face a challenging year in 2016 because of heightened market concerns over China's growth slowdown and the pace of interest rate normalisation in the US," Moody's said in a report titled Asia Credit — Regional Fundamentals Put to the Test: FAQ on Asia Credit in 2016.

Moody's MD and Chief Credit Officer (Asia-Pacific) Michael Taylor too said China's policy trilemma is creating uncertainty for regional credit.

"It's becoming evident that the Chinese government's primary objectives of maintaining growth in excess of 6.5 percent, implementing reforms and economic rebalancing, and ensuring macroeconomic and financial stability cannot be achieved in unison," Taylor said.

The recent stimulus measures in China and market intervention suggest that growth and stability in the country will be prioritised at the likely expense of a slower pace of reforms and delays to system deleveraging, the report cited.

On corporates rated by Moody's, the report said corporate credit quality will decline in 2016 as it did in 2015, leading to further rating pressure and defaults, especially for speculative-grade companies.

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