Singapore, June 07, 2016 — Moody’s Investors Service says that its Asian Liquidity Stress Index (Asian LSI) fell to 33.6% in May 2016 from 34.2% in April 2016.
“The reading in May 2016 is lower than the record high of 37.0% reached in December 2008 amid the global financial crisis, but the result is still higher than the trailing 12-month average of 29.3%,” says Brian Grieser, a Moody’s Vice President and Senior Analyst.
“The Asian LSI remains at elevated levels due to weak corporate liquidity profiles across Asia,” adds Grieser. “In particular, the property, oil & gas, and metals & mining sectors account for over 60.0% of the SGL-4 scores.”
The total number of Moody’s-rated high-yield companies with SGL-4 scores fell to 39 from 41 in May 2016 from April 2016, while the net number of Moody’s-rated high-yield companies fell to 116 from 120. The improvement in the Asian LSI during May was largely driven by high withdrawal activity as opposed to a fundamental improvement in underlying liquidity.
The Asian LSI measures the number of Moody’s-rated high-yield companies with the weakest speculative-grade liquidity score of SGL-4. The index rises when speculative-grade liquidity appears to deteriorate.
Moody’s analysis is contained in its just-released monthly report titled “Asian Liquidity Stress Index,” and is authored by Grieser.
The liquidity stress sub-index for North Asian high-yield issuers dropped to 35.1% in May 2016 compared to 36.8% in April 2016. Within this portfolio, the Chinese sub-index fell slightly to 37.5% from 37.9%.
The Chinese high-yield property sub-index rose to 30.8% from 28.9%. As for the Chinese high-yield industrial sub-index, the reading fell to 48.0% from 50.0%, due to the high withdrawal level.
The liquidity stress sub-index for South and Southeast Asian high-yield issuers increased to 31.0% in May 2016 from 29.5% in April 2016; its highest level since Moody’s began tracking the index in September 2010. The Indonesian sub-index remained at 20.0% month-on-month.
During May 2016, Moody’s downgraded six high-yield issuers. There were no upgrades. Between 1 January 2016 and 31 May 2016, Moody’s downgraded 27 high yield issuers and upgraded one.
Across Moody’s portfolio of 116 high-yield companies, the percentage of negative leaning outlooks—meaning ratings with either a negative outlook or on review for downgrade—increased to 40.5% in May 2016 from 39.2% in April 2016; the highest tally since September 2010.
Subscribers can access the report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_190293