JAKARTA (TheInsiderStories) - Moody’s Investors Service says that its Asian Liquidity Stress Index (Asian LSI) has fallen for a third consecutive month, registering 28.0% in February 2017 from 29.4% in January 2017.
Moody’s Asian LSI measures the percentage of high-yield companies with the weakest speculative-grade liquidity score of SGL-4, and increases when speculative-grade liquidity appears to deteriorate.
“The Asian LSI fell to its lowest level since October 2015, because of improvements in the North Asian sub-indices,” Brian Grieser, a Moody’s Vice President and Senior Analyst, said in a statement.
The strong bond issuance since September 2016 has also supported the improvement in the Asian LSI — because a meaningful portion of proceeds was used to refinance upcoming maturities — with Moody’s-rated high-yield issuance totaling $12.5 billion since that time. Year-to-date issuance through February 2017 is $5.1 billion versus $560 million during the same period in 2016.
“However, the Asian LSI remains above the long-term average of 22.7%, highlighting the ongoing weakness in corporate liquidity profiles across Asia,” added Grieser.
Moody’s analysis is contained in its just released monthly report titled “Asian Liquidity Stress Index: Improvements in North Asian Sub-Indices Drive LSI to Lowest Level Since October 2015,” and is authored by Grieser.
Moody’s report shows that all North Asian sub-indices improved in February 2017.
Specifically, the liquidity stress sub-index for North Asian high-yield issuers fell to 28.4% in February 2017 from 30.5% in January 2017. Within this portfolio, the Chinese Property sub-index fell to 17.1% from 17.5% over the same two months, due largely to recent refinancing activity, and is now at its lowest level since November 2014. And, the improvement in the Chinese Industrial sub-index to 46.7% from 50.0% was due to the total number of issuers in the sub-index with an SGL-4 score falling to 14 from 16.
By contrast, the liquidity stress sub-index for South and Southeast Asian high-yield issuers remained at 27.3% in February 2017. Likewise, the Indonesian sub-index stayed the same over the same two months, registering 23.8%.
Moody’s report points out that the number of Moody’s-rated high-yield companies with Moody’s weakest speculative-grade liquidity score of SGL-4 fell to 35 from 37 in February 2017 versus January 2017, while the number of rated high-yield companies fell to 125 from 126 over the same period.
At end-February 2017, Moody’s rated 125 speculative-grade non-financial corporates in Asia — excluding Japan and Australia — with rated debt of $65.2 billion. (*)