Bangkok--9 Mar--Moody's
Moody's Investors Service says that its Asian Liquidity Stress Index (LSI) rose in February with 14.6% of its rated speculative-grade portfolio demonstrating weak liquidity compared with 12.5% in January.
"The deterioration in February was again largely the result of weakening liquidity profiles, particularly of Chinese corporates and more specifically of Chinese property developers. Almost one in four of the high-yield Chinese property companies we rate is considered to have weak liquidity," says Laura Acres, a Moody's Vice President and Senior Credit Officer.
"Overall liquidity in Asia remains strong relative to the high point of 37% in the fourth quarter of 2008, the peak of the global financial crisis. However, it is now at the highest level since December 2010 and there have been three months of consecutive, marked erosion," adds Acres.
The Asian LSI measures the percentage of companies with the lowest speculative-grade liquidity rating (SGL-4), and increases when corporate liquidity appears to deteriorate.
"The number of issuers in the SGL-4 category rose to 14 in February from12 in January. At the same time, the total amount of rated debt outstanding in February increased slightly, to $40.4 billion from $40.1 billion in January, resulting from several high-yield issuances after a protracted period of virtually no issuance, offset by the withdrawal of one rating with US$358.9 million in rated debt," says Acres.
Looking ahead, Moody's expects markets in Asia to remain choppy, although the recent launch of three new deals, including one by a first-time issuer, suggests that caution may be abating. But, there will also be a further erosion of liquidity as the ongoing tightening of credit in China flows through to the wider corporate space.
Moody's forecasts that $4.2 billion of public debt (including domestic and cross-border bonds and convertibles) will fall due this year and that much of this will need to be refinanced. Some US$871 million of the total
US$4.2 billion of debt is to be refinanced by six issuers rated B3 andbelow: to date no Asian issuer has successfully raised a US$ bond while at this rating level or below.
The monthly index looks at looks at liquidity trends throughout the Asia-Pacific region (excluding Japan and Australia) for the speculative-grade companies Moody's rates, and quantifies the proportion of companies with weak liquidity.
The report is entitled Moody's Asia Liquidity Stress Index. It can be found at www.moodys.com