Moody's: Asian Liquidity Stress Index Improves in September

Moody's Investors Service says that its Asian Liquidity Stress Index (Asian LSI) improved in September from August. The index, which rises when speculative-grade liquidity appears to decrease, measured 19.7% in September from 21.1% in August.


"The improvement in the Asian LSI in September is in line with the downward trajectory of the index seen from May through July," says Laura Acres, a Moody's Senior Vice President.


"The lower LSI result reflects the net increase in the number of high-yield issuers to 117 from 114, as well as the reduction by one to 23, the number of companies with an SGL-4 score, which is the score for firms with the weakest speculative-grade liquidity," adds Acres.


"In addition, the LSI remains below the most recent high of 21.9% in October last year, and the record high of 37% reached in the fourth quarter of 2008, amid the global financial crisis. However, it is still elevated relative to historic levels and is well above the all-time low of 9.0% in November 2011."


Acres was speaking on the release of Moody's latest report on the index, entitled "Asian Liquidity Stress Index."


Moody's report says the liquidity sub-index for Chinese speculative-grade companies also improved in September, to 21.0% from 25.4% in August, as the number of Chinese corporates with an SGL-4 score decreased by two to 13 and the number of rated high-yield Chinese firms rose by three to 62.


China's high-yield property sub-index also fell, improving to 19.4% from 26.5%, as the number of SGL-4 scores decreased and the pool of high-yield rated companies increased.


The Indonesian high-yield sub-index edged down to 3.7% from 3.8%, as one company joined the sub-indexportfolio.


While not forming part of the Asian LSI, it is worth noting that the Australian high-yield index surged to 23.5% from 6.3% in August, as the number of companies with an SGL-4 score quadrupled to four from one.


Looking ahead, Moody's report says that the high-yield default rate for corporates in Asia Pacific (excluding Japan) will end the year at a low 1.6%, and which represents a slight decrease from the forecast in February of 2%. The lower predicted default rate anticipates a continued narrowing of the high-yield spread, and more stable ratings, as indicated by the significant fall in the number of ratings with negative reviews or outlooks.


Moody's report says that the percentage of companies with a negative outlook or which were on review for downgrade, fell to 25.6% in September, after reaching 28.1% in August. While the result in September is above the most recent low of 18.8% during the fourth quarter of 2010, it is well below the 43.2% posted in the fourth quarter of 2008.


Moreover, almost two-thirds of outlooks for rated Asian speculative-grade companies is stable, rising to 74 in September from 70 in August from a total of 117.


Moody's report points out that seven high-yield bond deals were launched in September, up from zero in August. Asian high-yield bond issues in the first nine months of this year have totaled $18.7 billion, a level which is higher than the annual totals for each of the three previous years.


Moody's report is based on the speculative-grade ratings of 117 issuers in Asia (excluding Japan and Australia) and covering $59.9 billion of rated debt in September; up from 114 issuers and $57.2 billion of rated debt in August.

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