The credit trend for Asia Pacific companies will remain broadly stable in 2022, said Moody's recently.
The stable trend is supported by continued economic growth globally and in the region, an exports rebound, and generally supportive monetary polices of the region's central banks, the credit rating agency observed.
However, there are also risks when it comes to the credit trend for Asia Pacific companies.
Though the Russia-Ukraine war has limited impact on Asia Pacific companies in the near-term, the threat of supply chain disruptions and continued inflation will exacerbate supply-side cost pressures, said Clara Lau, a Moody's Senior Vice President.
Higher inflation and increasing interest rates will dampen consumption and investment decisions, weighing on economic growth, she added.
In addition, the potential for new waves of coronavirus cases and further lockdowns increase the uncertainty for economic recovery, Moody's pointed out.
At end-Q1, the share of ratings with a stable outlook in the Asia Pacific corporate portfolio slightly decreased to 79% from 81% as of end-2021, the credit rating agency said.
The share of ratings with negative implications edged up to 18% from 16% as of the end of 2021, with Chinese property developers accounting for about 30%, according to Moody's.
Chinese property developers continue to face difficult market conditions and restricted funding access, the firm noted.
Negative rating actions outpaced positive rating actions, with 39 negative and 10 positive actions in Q1, Moody's said, adding that Chinese property developers were the key driver of the negative actions, accounting for about 65% of the total.
There were seven rated defaults in Q1, of which six were distressed exchanges, the firm said.
All defaults are Chinese property developers, according to Moody's, adding that this has resulted the trailing 12-month non-financial high- yield corporate default rate of 10.1% as of the end of Q1 2022.
