Rated Asia Pacific nonfinancial firms piled up their total cash holdings to a record-high $1.44 trillion, said Moody’s recently.
The level of cash holdings rose around 15% from that as of the end of 2019, according to Moody's Investors Service in a new report.
Higher debt raising and operating cash flow have pushed up the cash pile of Asia Pacific (ex Japan and Australia) nonfinancial companies to a peak,” said Shawn Xiong, a Moody's Assistant Vice President and Analyst.
Companies have largely maintained flat capital spending and lower dividend payments, he added.
"We expect this cash balance to stay flat over the next 12 to18 months, as growth in operating cash flow will be offset by higher capital spending and dividend payments,” said Mike Zhu, also a Moody's Assistant Vice President and Analyst.
Tighter funding conditions in China would also limit Chinese companies' ability to issue debt that will increase their cash positions, he added.
Moody’s expects Chinese companies to remain the largest cash holders, driven by major state-owned enterprises (SOEs), property developers and technology giants.
Chinese companies hold the largest amount, at about 70% of the region's cash, with Korean companies a distant second holding about 15%, the credit rating agency observed.
Companies' debt increased 11% from the end of 2019, lifting the cash pile to strengthen balance sheet liquidity against economic uncertainties arising from the coronavirus pandemic, according to Moody’s.
Chinese companies also dominate the portfolio, contributing about 72% of the region's debt, the firm said.
Korean and Indian companies are the next largest debtholders with 8% and 7% of the region's debt, respectively, Moody’s noted.
Chinese companies' debt growth is likely to slow in 2021 because of tightened control over property developers' debt growth and SOEs' efforts to reduce leverage, Moody’s pointed out.
Investment-grade companies continue to hold the lion's share of the region's cash, at 78%, said the company, adding that issuers from the technology, media and telecom, oil and gas, construction and property sectors hold around 55% of the cash, relatively consistent with that in 2019.
All but one of top 10 cash holders are investment grade while high-yield companies hold only 22% of the total cash, with 18% held by property companies, Moody’s said.