Defaults among Asia Pacific high-yield nonfinancial firms is estimated to decline to 7% this year from last year’s 10.9%, said Moody’s recently.
However the rate remains above the 10-year average of 4.4%, Clara Lau, a Moody's Senior Vice President and Group Credit Officer pointed out.
In general, defaults among Asia-Pacific high-yield nonfinancial firms will stay elevated in 2023, amid moderate economic growth in the region, supported by a gradual recovery in China following its relaxation of COVID restrictions, and peaking global inflation, according to a new report by Moody's Investors Service.
Global economic growth will continue to slow in 2023, with G-20 advanced and G-20 emerging economies forecast to grow by 0.2% and 3.1%, respectively, the credit rating agency said.
China's real GDP growth will be at a low level of 4.0%, reflecting the time it will take for manufacturing and domestic consumption to recover to pre-pandemic levels, protracted weakness in the property sector, and declining export demand as global growth softens, the firm noted.
Monetary policy will broadly remain tight in the near term, but the pace of interest rate increases will slow toward the latter part of the year, Moody’s predicted.
In addition, China and Japan will continue easing monetary policies to boost economic growth and maintain credit availability to support targeted sectors, the firm added.
Weak homebuyer confidence will keep Chinese property markets subdued, but the government's recently enhanced measures to improve funding accessibility for some developers will slightly alleviate liquidity pressure in the sector, Moody’s observed.
There were 23 rated defaults in 2022, all of which by Chinese property developers as the subdued market and funding access difficulties aggravated their liquidity and refinancing risks, Moody’s said.
