JAKARTA (TheInsiderStories) — Moody‘s Investors Service says that its Asian Liquidity Stress Indicator (LSI) has reached its second weakest level on record, registering 34.9 percent in November 2018 from 33.3 percent in October 2018.
The Asian LSI measures the percentage of high-yield companies with Moody‘s weakest speculative-grade liquidity score of SGL-4 as a proportion of high-yield corporate family ratings. The indicator
increases when speculative-grade liquidity deteriorates.
“The 34.9 percent in November 2018 is behind only the record high of 37.0 percent set in December 2008, amid the global financial crisis,” says Annalisa Di Chiara, a Moody‘s Vice President and Senior Credit Officer.
The reading in November was well above the trailing 12-month average of 30.0 percent.
“While refinancing risk has been manageable for most companies in 2018, liquidity remains tight across many sectors, highlighting the difficult market conditions,” adds Di Chiara.
While, the primary driver for the weak liquidity trend in 2018 is the increasing number of companies that rely heavily on uncommitted, short-term facilities from relationship banks.
During November 2018, the North Asian sub-indicator weakened to a record high of 37.3 percent, with the Chinese high-yield sub-indicator also registering a record high, reaching 40.8 percent for the month from 39.4 percent in October 2018.
The Chinese industrials sub-indicator reached 54.3 percent in November compared with 53.2 percent in October, approaching the all-time high of 54.8 percent set in November 2016.
Meanwhile, the Chinese property sub-indicator deteriorated to 28.8 percent in November 2018 from 26.9 percent in October 2018.
The South and Southeast Asian sub-indicator has also weakened, increasing to 30.4 percent in November 2018 from 28.1 percent in October 2018. The Indonesian sub-indicator worsened to 26.7 percent from 22.6 percent over the same period.
High-yield issuance totaled $4.4 billion in November 2018, with issuance for the 11 months between January and November 2018 totaling $22.6 billion (around 34.0 percent lower than the $33.9 billion raised in the same period last year).
The median interest rate on new issuance rose to 7.5 percen in 2018 from 6.6 percent for the same period in 2017, highlighting the difficult market conditions in 2018.
Among companies with SGL-4 scores, the percentage of companies with a corporate family rating of B3 or below increased to 32.8 percent in November 2018 from 30.5 percent in October 2018.
The number of rated high-yield companies with Moody‘s weakest
speculative-grade liquidity score of SGL-4 rose to 58 in November from 56 in October, while the number of high-yield companies rated by Moody‘s fell to 166 from 168 over the same two months.
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