Moody's: Asian Liquidity Stress Index Rises in December

Moody's Investors Service says that its Asian Liquidity Stress Index (Asian LSI) rose just one percentage point to 28.6% in December from 27.6% in November.


The index, which rises when speculative-grade liquidity appears to decrease, was also up from 9.3% in December 2011, but far from its record high of 37% in 4Q2008, the height of the global financial crisis.


The index rose in December as one company moved to the SGL-4 category, which is the lowest speculative-grade liquidity score. The number of companies in the index remained unchanged from November at 105.


"At the same time, the continued high level of companies with a score of SGL-4 reflects a range of concerns, including looming debt maturities for issuers which do not have confirmed refinancing plans, or do not have access to committed undrawn bank facilities," says Laura Acres, a Moody's Senior Vice President.


"For other issuers, a tailing-off of commodity prices has resulted in weaker projected cash flows, which mean that they may have to raise debt to fund planned capital expenditure instead," says Acres.


The liquidity sub-index for Chinese speculative-grade and Chinese property companies both remained unchanged in December, at 31.4% and 31.3% respectively. The number of property companies with a score of SGL-4 remained at 10.


However, there are just 32 issuers in the Chinese sub-index, so movement by one company will move the sub-index by 3.13%. The sub-index for Indonesian companies also remained unchanged for the third consecutive month at 12% in December.


December was also a quiet month for new issuance, with only Hong Kong-based conglomerate CITIC Pacific Limited (Ba1 negative) launching a US$250 million tap on its US$750 million October deal.


Early indications further suggest that January may prove a bumper month in respect of bond issuance. Three


Chinese property developers, Country Garden Holdings Company Limited (Ba3 positive), Kaisa Group Holdings Ltd (B1 stable) and Shimao Property Holdings Limited (Ba3 stable) have each successfully closed bond deals with material oversubscription within the first few days of the month.


There were two corporate family rating downgrades in December and no upgrades, which meant that 4Q2012 was the sixth consecutive quarter where downgrades exceed upgrades.


However, there has been a growing number of positive rating actions in the past three quarters, so the ratio of downgrades to upgrades is falling and stands at 1.3x, which is its lowest level since 2Q2011.


The net amount of high-yield debt Moody's rates in Asia rose slightly in December to US$45.1billion from US$44.9 billion in November. The increase was because of CITIC Pacific's tapping of the bond market for US$250 million.


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