Moody's Asian Liquidity Stress Index Stays Flat; Overall Liquidity Strong

Moody's Investors Service says that its Asian Liquidity Stress Index remained at 9.7% in September, unchanged from August, indicating that 10 names in Moody's-rated speculative grade portfolio demonstrated inadequate liquidity.


"The index, which declines when corporate liquidity increases, has generally hovered between 11% and 13% since the start of 2011, and overall liquidity remains strong relative to the high of 37% in Oct-Dec 2008," says Laura Acres, a Moody's Vice President and Senior Credit Officer.


"However, despite the lack of movement in the overall index in September, there was some changes as one issuer moved out of the SGL-4 category, which is the lowest speculative-grade liquidity score for a company. Conversely, one issuer moved into this category," says Acres.


The report further looks specifically at the liquidity situation for Chinese corporates, a topic which has attracted strong market attention, given government attempts to cool inflation through reining in credit growth for the world's fastest-growing economy.


"Our report notes that the liquidity index for Chinese companies rose to 11.6% at end-September from 9.3% at end-August, or its highest level since December 2010," says Acres.


Liquidity for Chinese companies had, until recently, been stronger than that for Moody's overall speculative-grade portfolio, but it has weakened slightly as the number of companies identified as having the lowest speculative-grade liquidity score of SGL-4 has increased. However, it should be noted that given the relatively small rated universe just one issuer movement will impact the Chinese company index by 2.3%.


"And, for the region as a whole, the current level of liquidity still suggests a low probability of default for speculative-grade companies.


Asia's default rate was 0% for the 12 months ending in September, compared with the most recent high of 17.8% in Oct-Dec 2009," says Acres.


The Asian Liquidity Stress Index, which Moody's publishes each month, examines liquidity trends throughout the Asia-Pacific region (ex-Japan and Australia) for the speculative-grade companies we rate and quantifies the proportion of companies with inadequate liquidity.


The Asia Liquidity Stress Index covers 103 speculative-grade companies. The total amount of rated debt outstanding is around $49 billion.




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