Slightly Negative Credit Trend for Asia's Corporates to Continue, Says Moody's

The slightly negative credit trend for Asia's corporates in 2Q2014 will continue for the rest of 2014, while the credit trend for corporates in Japan will continue to stabilize, says Moody's Investors Service.

"Our expectation of continuation of the slightly negative rating trend for the balance of the year reflects our central macroeconomic scenario of softer Chinese growth, the negative impact of which is somewhat offset by a modest pick-up in the US and a return to expansion in the Euro area," says Clara Lau, a Moody's Group Credit Officer. "It also factors in our expectation that US tapering will continue to be implemented gradually," adds Lau.

There were 17 negative actions and eight positive actions in 2Q2014, compared to 16 negative and eight positive actions in 1Q2014.

"Asian issuers accounted for the majority of actions in 2Q2014, recording ten negative and seven positive actions. Chinese issuers accounted for 80% of the total for negative actions," says Lau.

"The share of Asian corporate ratings with negative implications increased to 21% as of end-2Q2014 from 19% as of end-1Q2014, while the share of Australasian corporate ratings with negative implications increased to 18% from 16%," adds Lau.

The 2Q2014 rating trend of the Australasia portfolio turned more negative and remained pressured by the mining sector which accounted for some 60% of the total for negative actions, reflecting our expectation of continued challenging operating conditions and thus pressure on the mining companies' financial profiles.

On the other hand, the rating trend for Japanese non-financial corporates remained broadly stable.

"We expect the stable rating trend of Japanese corporates to continue in view of improvements in the domestic economy and exports," says Lau.

There were two negative actions and no positive action in 2Q2014. The share of Japanese corporate ratings with stable outlooks increased to 76% as of end-2Q2014 from 74% as of end-1Q2014.

And the share of ratings with negative implications declined to 24% from 26%.

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