US Default effect on Asia, Latin America, Poor countries

Scenario                                                                   

Standard and Poor's, Moody's and FITCH   revises the ratings on the U.S. to ‘SD’ (selective default) and then raise them to ‘AA/A-1+’ with a negative outlook.

 A few weeks later....

In this scenario,1) Expect a systemic market disruption to follow the revision to 'SD', which would have a significant impact on ratings in the financial institutions sector.

2) If a selective default occurs, but without a systemic market disruption, 

 expect this scenario to have less of an impact on global financial institutions ratings.

• Asia-Pacific: 

  
  The region's financial sector might experience more pronounced funding difficulties in this scenario . These could be associated with market disruptions that could result in costlier funding that could erode profits, while smaller market participants might experience difficulties in refinancing maturing debt. More exposed to a prolonged disruption could be Australian, Korean, and Japanese banks that have some dependence on offshore funding markets. Thus, the impact of a dislocation in global funding markets would be high.  Banks that have previously benefited from strong government support would receive support this time around as well. Asia-Pacific banks and insurers would also feel the impact on their marked-to-market assets on their balance sheets and pressure on market-dependent income. The overall impact would hurt earnings for some, and  couldn’t rule out downgrades for smaller players. ( Contagion Effect )
  
  It’s also important to remember that China and Japan are large holders of U.S. debt securities. The immediate disruptions in global markets would be unlikely to cause a substantial hike in official interest rates in China and Japan--if authorities there moved quickly to maintain confidence. Both countries would likely experience repatriations of funds deployed abroad plus a flight to quality--which, to a degree, should help the largest banks (the expected recipients of such funds) deflect funding pressures.
  

  Latin America

  
  Finance companies are more sensitive than other companies in the region to liquidity shortages because of links to debt market funding requirements and our expectation that banks could close credit lines. Additionally, an economic impact similar to the one in 2008 and 2009 could hurt asset quality and profitability for some finance companies. The ratings on issuers in other sectors in Latin America are not directly tied to the U.S. sovereign rating, which may help limit the number of rating actions.

        I.M.F., W.H.O. and other so many Associtions may find huge difficulties, is an separate issue....