Bangkok--14 Jun--Moody's Investors
Moody's Investors Services says in a new report that the default rate among Moody's-rated non-financial corporates in Asia Pacific ex-Japan will drop sharply in 2010, continuing a trend that began at the beginning of this year.
"Accordingly, the speculative grade default rate is expected to fall to about 3.5% by end-2010 from 17% in 2009, based on Moody's Credit Transition Model (CTM)," says Clara Lau, a Moody's Group Credit Officer .
"The projection is in line with the global default rate forecast to fall to 2.4% by end-2010 from 13% at end-2009. This scenario incorporates Moody's base case assumption of continued economic recovery and generally stable credit spreads through 2010," says Lau.
Lau was speaking on the release of a Moody's report -- which she authored
-- on the default rate estimate for rated Asia-Pacific non-financial corporates in 2010.
"The sharp expected decline in the default rate for Asia Pacific reflects a significantly better credit market environment and progressively improving economic conditions in the region," says Lau.
"This situation is in turn reflected in 2 key assumptions embedded in the CTM -- a materially lower high-yield spread forecast and declining unemployment rates," comments Lau.
"Furthermore, a better rating mix for 2010, reflecting a stabilizing credit trend, is contributing to the lower estimated default rates," adds Lau. "The average rating for the rated high-yield issuers is B1, a notch higher than last year."
"Further contributing to the lower default rate is the overall increased accessibility by the region's speculative-grade companies to the bank and capital markets," says Lau.
Looking back, in 2009, non-financial corporate rated defaults for the region surged to a record 11 cases; and the volume of defaulted debt was around USD3.5 billion, up from USD100 million in 2008, and a complete absence of defaults during 2004-2007.
The report is entitled, Default Rates for Rated Asia-Pacific Non-Financial Corporates to Drop Sharply in 2010. It can be found at www.moodys.com