Bangkok--18 May--Moody's Investors
The stable rating trend for Asia Pacific (ex-Japan) corporates is expected to continue against a backdrop of operating challenges, including inflation and gradual monetary policy tightening. Rising merger and acquisition activity and potential shareholder- friendly capital management initiatives are the major factors that may change this trend.
As of end-1Q 2011, 83% of the rated APxJ corporate portfolio had stable rating outlooks, while 12% of ratings showed negative implications, and 5% exhibited positive implications However, a notable negative trend has 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 face operating challenges, including rising fuel prices and uncertain demand as a result of the natural disasters in New Zealand and Japan.
In 1Q 2011, positive and negative rating actions tracked each other closely with negative actions slightly above the positives at 11 to 8. At the same time, our corporate rating trend tracker for Asia and Australia hovered around 0.8 and 0.7 respectively, similar to the last quarter.
For rated Japanese corporates , the stabilizing momentum evident since 3Q 2010 was derailed by the March 11 earthquake and tsunami. There was notable downward pressure as the proportion of ratings with negative outlook implications increased significantly to 27% at end-1Q 2011 from 19% as of end-2010. Ratings with stable outlooks dropped to 69%.
Negative actions surged to 14 in 1Q2011, significantly outweighing the one positive rating action. The corporate rating trend tracker dived to 0.07 from 0.5 in Q4 2010.
There were no defaults during 1Q 2011 and the trailing 12-month Asia Pacific (ex Japan) speculative default rate dropped further to 1.7% from 3.4% at end-2010.