Hong Kong, May 06, 2013 -- Moody's Investors Service says that its Asian Liquidity Stress Index
(Asian LSI) inched up to 27% in April from 26.9%
in March. While the deterioration was slight, it was the
second consecutive month that the index had worsened.
"The slight increase in the Asian LSI reflects firstly the addition
of a Chinese issuer to our lowest (weakest) speculative-grade liquidity
score of SGL-4, and secondly, the inclusion of three
new high-yield ratings in April -- all of which relate to
Chinese issuers -- which tempered the impact of the marginally
higher number of companies with SGL-4 scores," says
Laura Acres, a Moody's Senior Vice President.
Acres was speaking on the release of Moody's latest "Asian
Liquidity Stress Index" report.
The index -- which rises when speculative-grade liquidity
appears to decrease -- has increased steadily within a narrow range
since reaching a recent high of 29.1% in October 2012.
Nonetheless, the recent levels are below the record high of 37%
seen in the fourth quarter of 2008, or during the global financial
crisis, but are well above the all-time low of 9%
in November 2011.
"On the other hand, the number of companies with an SGL-1
score, reflecting very good liquidity, increased to 13 in
April from 11 in March and February and, in percentage terms,
is at the highest level since we started publishing this data.
Overall, the number of SGL-1 scores has increased gradually
this year after holding steady for much of 2012," says Acres.
"In addition, the total number of rated high-yield
companies increased to 111 in April from 108 in March. The number
of ratings and the amount of rated debt, at $58.7
billion, are at all-time highs. Moreover, we
assigned first-time corporate family ratings (CFR) to three companies
in April, all of which are China-based issuers,"
adds Acres.
Looking ahead, according to the report, the high-yield
default rate for Asia Pacific (ex-Japan) corporates will stay at
a low 2% in 2013. It will trend downwards during the first
half of the year and rise mildly in the second half. The 2%
translates into one or two potential defaults.
The report also says in terms of the liquidity sub-index for Chinese
speculative-grade property companies, the index decreased
to 31.4% in April from 32.4% the month before.
In contrast, the Indonesian sub-index for speculative-grade
companies as a whole was unchanged for a fourth consecutive month at 12.5%,
and the Australian index was also flat, at 9.1%.
Moody's report points out that the number of high-yield bond
issuances slowed in April. Seven companies successfully issued
bonds totaling approximately $2 billion, versus the nine
companies in March that raised $3.2 billion.
Nevertheless, the first four months of 2013 saw a total of 36 rated,
high-yield bond deals closing, which raised an aggregate
$13.4 billion; an amount that was more than that raised
in the whole of 2012 and 2011.
"While we did not change the corporate family ratings of any companies
in April, we changed the outlooks of two companies, both in
a negative direction," says Acres.
As a result, the percentage of companies with a negative outlook
or on review for downgrade rose slightly to 23.4% in April
from 23.1% in March. The number of companies with
a positive outlook was unchanged, at 10.
Moody's report notes that liquidity in Asia is generally weaker
than in other regions, partly because its debt capital markets are
not as mature and also because corporates rely more on local bank markets
for uncommitted funding.
Relationship banking, which relies on rolling over short-term
and uncommitted lines of credit rather than providing committed levels
of funding, is far more common in Asia than other major economic
regions. This reliance on the domestic bank markets has contributed
to the Asian LSI's elevated level relative to other regions.
Subscribers can access the report at http://www.moodys.com/research/Moodys-Asian-Liquidity-Stress-Index-May-2013--PBC_153558
***
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Laura Acres
Senior Vice President
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
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Gary Lau
MD - Corporate Finance
Corporate Finance Group
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Moody's: Asian Liquidity Stress Index up in April for 2nd month