Asian Liquidity Stress Index Falls in July, Says Moody's

Moody's Investors Service says that its Asian Liquidity Stress Index (Asian LSI) declined for a third consecutive month to 20.2% in July from 23.9% in June.


The index, which decreases when speculative-grade liquidity appears to increase,  is at its lowest level since July 2012, when it was 16.8% but remains

historically high.


"The LSI has decreased gradually from its recent high of 29.1% in October 2012. The July decline resulted from a net decrease in the number of companies with our

lowest (weakest) speculative-grade liquidity score (SGL-4)," says Laura Acres, a Moody's Senior Vice President. "The total number of rated high-yield companies also increased by one to 114, which further contributed to the overall improvements in this month's Asian LSI."


The liquidity sub-index for Chinese speculative-grade companies fell to 25.4% from 28.8% in June as the number of Chinese companies with an SGL-4 score

decreased by two.


The number of rated Chinese high-yield corporates was unchanged at 59. China's high-yield property index also decreased, to 26.5% from 29.4% in June, as one company left the roster of those with an SGL-4 score.


The Indonesian sub-index, which was 8.0% in May and June, plunged to 3.8% in July. The decrease reflected the departure of one company from the list of those with an SGL-4 score.


Meanwhile, the Australian reading was unchanged from June at 6.7%. High-yield rated bond issuance slowed further following the strong start early this year. However, issuance so far this year ($17 billion) is still higher than the annual totals for each of the previous three years.


Looking ahead, the high-yield default rate for Asia Pacific (ex-Japan) corporates will stay at a low 2% in 2013, according to Moody's Credit Transition Model. The rate trended downward during the first half of the year and will rise mildly in the second half. The 2% translates into one or two potential defaults.

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