Moody's: 2013 Asian Corporates High-Yield Default Rates to Remain Low

Moody's Investors Service says that the high-yield default rate for Asia Pacific (ex-Japan) corporates will -- according to Moody's Credit Transition Model (CTM) -- remain at a low level of about 2% in 2013.
"The estimate is based on the assumptions that forecasted high yield spread will remain largely stable and the Asia Pacific (ex-Japan) GDP-weighted average unemployment rate will stay at similar level to that of 2012 at around 4.5%," according to Clara Lau, a Moody's Group Credit Officer.
"The expectation of a continued low default rate for 2013 strongly depends on ongoing accommodative monetary policies allowing access to capital markets as many Asian speculative-grade corporates rely on short-term funding to support operations and refinancing," says Lau.
Lau notes that tThe 2013 estimate of 2% is slightly above the 0.9% recorded for 2012, despite Moody's broadly stable outlook for the region and the corporate sector. "The expected rise will primarily be driven by the overall credit deterioration in Moody's-rated portfolio in 2012," says Lau. 
During last year, the average rating for the speculative-grade portfolio fell to B1/B2 at end-2012 from Ba3/B1 at the beginning of 2012 because of a large number of negative actions, primarily for Chinese issuers.
As far as rating transitions is concerned, the percentage of ratings that did not change in 2012 was 83% for investment-grade issuers and 47% for speculative-grade issuers, compared to 80% and 52% respectively for the global portfolio.
"The higher volatility for speculative-grade ratings for Asian corporates was mainly driven by the large number of negative actions for the Chinese portfolio, in turn reflecting concerns over the impact of an uncertain operating environment and tight liquidity, in particular in 1H 2012, on issuers' operating and credit profiles," comments Lau.



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