After jumping to 24.4% in May, the Asian Liquidity Stress Index reversed direction in June, declining to 23.6%, says Moody's Investors Service.
The change reflects a net decrease of one (to 29) in the number of companies with our lowest (weakest) speculative-grade liquidity score (SGL-4). The net number of high-yield rated companies remained at 123.
The index - which increases when speculative-grade liquidity appears to decrease - remains well below the record high of 37.0% reached during the fourth quarter of 2008 amid the global financial crisis.
"However, it is slightly above the index's long-term rolling average of 20.2% and its trailing 12-month average of 21.5%," says Annalisa Di Chiara, a Moody's Vice President and Senior Analyst, who was speaking on the release of Moody's latest report on the index.
The liquidity sub-index for Chinese speculative-grade companies decreased slightly to 26.5% in June from 26.9% in May, as the number of high-yield Chinese companies rose to 68 from 67. Meanwhile, the number with an SGL-4 score remained at 18 in June.
China's high-yield property sub-index also declined, to 21.4% from 22.0%, as the number of companies rose by one to 42.
Moody's also introduced a new sub-index for Chinese industrials covering 26 companies in this category.
"It is worth noting that liquidity for Chinese industrials is far weaker than that for Chinese property developers and has reached a historical high. Nine of the 26 companies have SGL-4 scores, which makes the sub-index 34.6%," says Di Chiara.
Many of the issuers in this segment are in commodity-related and heavy-manufacturing-based industries, which have seen negative trends in fundamentals, reducing cash flows and liquidity levels.
By contrast, the Indonesian sub-index rose to 8.0% from 7.7% as the number of speculative-grade Indonesian companies declined by one to 25.