Bangkok--19 Jan--Moody's
Moody's Investors Service says that corporate rating trends in Asia (ex Japan) will remain stable in 2011, but expects no further significant improvements in view of various challenges.
"Corporates in Asia (ex-Japan) have shaken off the lingering effects of the global financial crisis, and rating trends recovered strongly in 2010, with positive and negative actions at par at 32, a significant improvement from 2009, which reported 20 positive and 87 negative actions," says Clara Lau, a Moody's Group Credit Officer.
"Looking ahead at the rest of 2011, we expect the stable trend to persist, and as such anticipate a continuation of low default rates and broadly stable credit conditions," adds Lau.
"However, we do not expect any further material improvement in credit quality, as various challenges -- such as the appetite for M&A, tightening of monetary conditions, and a rise in input costs -- will counter the continued strong economic conditions forecast across the region," says Lau.
Lau was speaking on the release of Moody's annual credit outlook and review of corporate rating trends in Asia. The report was authored by Lau and the Moody's corporate finance team in the region.
"Further supporting the stable credit trend is the fact that Asian corporates, in aggregate, have entered 2011 with sounder liquidity. The number of corporates with sufficient liquidity has returned to pre-crisis levels and is approaching the peak seen in 2007," comments co-author Elizabeth Allen, a Moody's Vice President and Senior Credit officer.
According to the report, by the end of 2010, the proportion of ratings with stable outlooks had returned to pre-crisis levels and stood at 78%.
In addition, Moody's has stable outlooks for all the rated corporatesectors: Chinese property developers; gaming; Indonesian coal mining; oil & gas; Singaporean real estate investment trusts (S-REITs); steel; technology and semi-conductors; telecommunications; and utilities.
However, (1) event risks arising from M&A as corporate appetites for growth and expansion rise; (2) slowing economic growth for Asia (compared to 2010); and (3) rising inflation and tightening monetary conditions across the region, which will crimp margins and demand -- these are all challenges that will moderate the positive rating trends for Asian corporates in 2011.
The report is entitled "Asian Corporates (ex Japan) Credit Outlook and
Review: Rating Trends Return to Pre-Crisis Levels after Strong Recovery in 2010," and can be found at www.moodys.com.