The trailing 12-month default rate for Asia Pacific high-yield nonfinancial companies will fall to 3.6% at the end of 2021, from 7.4% at the end of 2020, said Moody’s recently.
The lower default rate forecast incorporates our expectation of continued economic rebound in the US and China, aided by supportive fiscal and monetary policies and accelerated vaccine rollouts, according to Clara Lau, a Moody's Senior Vice President and Group Credit Officer.
"Still, the speed and strength of recovery will diverge across APAC, depending on the progress of countries' vaccine rollouts and containment of infections,” she said. “The renewed lockdowns in countries undergoing a resurgence in infections will hinder business activity and corporate earnings recovery, which could squeeze the liquidity of weaker companies.”
Supportive policies over the near term will keep borrowing costs low, with major central banks maintaining low policy rates, asset purchases and lending programs before reaching their full employment and inflation targets, Moody’s pointed out.
While the Chinese government has become more selective in providing support to distressed state-owned enterprises (SOEs), market liquidity will remain sufficient and most of Moody's rated issuers will retain access to the funding markets, although financially weaker ones will face greater refinancing uncertainty, the credit rating agency noted.
There was one rated default in the second quarter of the year, bringing the total number of rated defaults for the first half of 2021 to four and the trailing 12-month default rate for Asia Pacific high-yield nonfinancial companies to 5.7% at end-June 2021, Moody’s said.
