Moody’s: Asian LSI weakens slightly in August; Indonesian and Chinese industrials sub-indices hit all-time highs
Singapore, September 08, 2016 — Moody’s Investors Service says that its Asian Liquidity Stress Index (Asian LSI) worsened slightly in August, rising to 33.9% from 32.5% in July.
“The Asian LSI weakened further in August as both the Indonesian and Chinese industrials sub-indices hit all- time highs at 30% and 52%, respectively,” says Brian Grieser, a Moody’s Vice President and Senior Analyst.
“Furthermore, the Asian LSI remains at elevated levels due to weak corporate liquidity profiles across the region. Property, oil & gas, and metals & mining sectors, which account for over 50.0% of the SGL-4 scores, continue to pressure the Asian LSI,” says Grieser.
“The reading remains below the record high of 37.0% reached in December 2008 amid the global financial crisis, but is higher than the trailing 12-month average,” adds Grieser.
The index measures the percentage of high-yield companies with SGL-4 scores and increases 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.
During August, the liquidity stress sub-index for North Asian high-yield issuers increased to 34.7% from 33.8%, and within this portfolio, the Chinese sub-index jumped to 37.5% from 35.9% in July.
The Chinese high-yield property sub-index remained at 28.2%, while the Chinese high-yield industrial sub- index increased to 52.0% from 48.0%. Each of the four North Asia sub-indices are at or slightly below their all- time high levels.
The liquidity stress sub-index for South and Southeast Asian high-yield issuers increased to 32.6% in August from 30.2% in July. The Indonesian sub-index increased to 30.0% in August from 25.0% in July.
In August, we downgraded six high-yield issuers and upgraded one. We have downgraded 36 high-yield issuers in 2016 compared to 3 upgrades in the first eight months of the year.
The number of speculative-grade companies with negative-leaning outlooks decreased to 45 in August from 47 in July. Overall, the percentage of negative leaning outlooks declined to 39.1% in August from 40.2% in July, but remains below the peak of 44.8% posted in the fourth quarter of 2008.
At the end of August, Moody’s rated 115 speculative-grade non-financial corporates in Asia (excluding Japan and Australia) with debt of $59.1 billion.