Bangkok--18 May--Moody's Investors
Moody's Investors Service says that the stable rating trend evident for Asia Pacific corporates during 1Q 2011 is expected to continue for the rest of the year against a backdrop of various operating challenges and with the exception of Japan.
"These challenges include inflation and gradual monetary policy tightening, while rising merger and acquisition activity and potential shareholder-friendly capital management initiatives are other major factors that may change this stable trend," says Clara Lau, a Moody's Group Credit Officer.
Lau was speaking on the release of Moody's report on rating actions for corporates in Asia Pacific during 1Q 2011 and which she authored. The report also looks at the rating trend of rated corporates, which includes Asia, Australia/New Zealand, and Japan.
In 1Q 2011, positive and negative rating actions in Asia Pacific(ex-Japan) tracked each other closely with negative actions slightly above the positives at 11 to 8. At the same time, Moody's corporate rating trend tracker for Asia and Australia hovered around 0.8 and 0.7, similar to the last quarter.
"In Asia, positive rating actions primarily reflected improvements in credit profiles either due to sustained improvements in operating performances, or expectations of benefits from acquisitions, mergers or partnerships with stronger peers," says Lau. "In the case of Australia, the solid growth of the economy on sustained strong commodity demand and companies' proactive management of refinancing and liquidity supported corporates' operating and financial improvements," adds Lau
However, a notable negative trend had emerged for Chinese property developers and airline issuers. The former was a result of aggressive expansion -- amidst a slowing market and tightening liquidity -- whereas the latter faced operating challenges, including rising fuel prices and uncertain demand as a result of the natural disasters in New Zealand and Japan.
On the other hand, the stabilizing rating trend which had developed since 3Q 2010 for Japanese corporates took a sudden turn after the earthquake and tsunami, reflecting the negative impact of the disaster and concerns of supply chain and power supply disruptions. Sectors particularly affected were utilities, automobile manufacturers and a few other types of manufacturing companies.
The number of negative rating actions surged to 14 as of end-Q2011 from 2 at end-2010, while the corporate rating trend tracker dropped significantly to 0.07 in 1Q2011 from 0.5 in 4Q2010.
The report is entitled, 1Q 2011 Asia Pacific Rating Actions and Outlook Summary. It can be found at www.moodys.com