Credit trends in Asia Pacific for most non-financial companies in the rest of 2022 remain stable with the exception of Chinese property developers, said Moody's Investors Service recently.
However, slowing economic growth, rising inflation and hawkish monetary policies globally pose risks when it comes to credit trends in Asia Pacific, the firm noted.
Rising commodity, food and energy prices are eroding household consumption power and the profit margins of downstream companies, said Clara Lau, a Moody's Senior Vice President.
As tightening monetary policies globally to fend off inflation are lifting interest rates and lowering liquidity, this will dampen private consumption and investment incentives, and constrain funding access - especially for weaker companies she added.
Moody's expects global economic growth to decelerate in the second half of the year.
In particular, the credit rating agency forecasts China's GDP growth in 2022 to slow to 4.5%, given COVID-19 lockdowns in several economically important areas, the property sector downturn and slower export growth.
While central banks have accelerated their timetables for raising interest rates, China and Japan are not doing the same.
China continued to ease monetary policies to facilitate economic growth and launched supportive policies to targeted industries, Moody’s observed, adding that the Bank of Japan expects to maintain the short-term interest rate target at -0.1% and buy bonds to anchor the 10-year government bond yield at around zero.
At end-Q2, the share of ratings with a stable outlook in the Asia Pacific corporate portfolio rose to 82% from 79% at the end of Q1, according to Moody’s.
The share of ratings with negative implications was down to 15% from 18% in the previous quarter, the lowest level since the pandemic, the firm said.
Chinese property developers formed one-third of ratings with negative implications and had four defaults, comprising one due to missed payments and three distressed exchanges, Moody’s noted.
In addition, Chinese property developers took the lion's share, at 73%, of the region's negative rating actions, Moody’s observed.
Positive rating actions were fewer than negative actions in Q2 and were mainly on Asia Pacific metals and mining companies that rode on high commodity prices, the credit rating agency said.
Gaming and consumer services faced the greatest strain due to occasional COVID-19 outbreaks and lockdowns delaying the recovery of tourist arrivals and hence, gaming operators' revenue, the firm added.