Moody's Investors Service says that the JP Morgan Asia Credit Index (JACI) -- which tracks the total return performance of Asia's fixed-rate USD bond market -- remains concentrated in 10 issuers.
"The top 10 -- whether corporate or sovereign -- account for 28.9% of the overall index, reflecting a fairly high degree of issuer concentration, although over the longer term, this has been lessening," says Laura Acres, a Moody's Senior Vice President.
"The index is skewed toward sovereigns and quasi-sovereigns, which together account for 34.1% of total exposure, and is also increasingly skewed toward China which now accounts for 25.9% of the market capitalisation," adds Acres.
The JACI, as of 31 January, included some 705 bonds issued by 312 companies, with a total weighted market capitalisation of $445 billion.
Moody's rates 91.3% of the index by market capitalisation.
This data compares with 660 bonds issued by 301 companies with a market capitalisation of $420 billion in July 2013, the date of Moody's previous report on the JACI.
Furthermore, on the issue of concentration, at its simplest level, the JACI can be sub-divided into investment-grade and non-investment-grade and, in terms of weighting; it is heavily skewed towards investment-grade issuers, at 76.2%. This percentage is up from 68.5% in July 2013, driven by the upgrade of the Philippines to Baa3 positive in October 2013.
The report also says that sovereign rating actions have the greatest influence on the JACI's movements. Sovereigns directly make up 14.5% of the index, but their movement also affects government-related issuers (GRIs) and related entities whose ratings may automatically change as a direct result of a sovereign rating movement.
This situation is particularly true for the large number of state-owned or state-controlled utilities and oil and gas companies, which are prevalent in the index.
In addition, the rating outlooks for companies in the index are currently broadly stable: 73.6% have ratings with stable outlooks, up from 69.7% on 31 July 2013.
Meanwhile, the proportion of the index displaying a negative bias (that is either on review for downgrade or on a negative outlook) has fallen to 8.2% from 10.3% as of 31 July. The number of companies in the index with positive outlooks has increased to 8.8% from 2.4% in July, in part reflecting the positive outlook on the Philippines.
The JACI examines credit trends and rating movements for debt issuers in the JACI, most of which are rated by Moody's.
The index tracks the total return performance of select Asian bonds denominated in US dollars, is weighted by market capitalization and covers 15 Asian markets, excluding Japan and Australia.