Uneven pace of economic recovery for Asian ex-Japan corporates underpins its stable outlook for the sector, with multiple indicators showing signs of recovery, but risks remain abound, said Moody’s Investors Service recently.
Moody’s expects the return to normalcy will be a slow process across the region, with uncertainty remaining around potential resurgences of the virus, ongoing trade tensions, and financial market volatility,” said Gloria Tsuen, a Moody’s Vice President and Senior Credit Officer.
“Still, GDP growth rates are set to rebound next year, currencies are recovering and capital inflows have started increasing, setting the stage for some improvement in corporate credit metrics over the next 12-18 months,” she noted.
Corporate downgrades have far outnumbered upgrades this year, and Moody’s outlooks for many companies remain negative for now, the credit rating agency said.
The impact has been less negative in China, where many rated companies benefit from strong government support, according to the company.
Across the board, Moody’s industry sector outlooks are gradually stabilising as the recovery commences.
The outlook for 23% of global sectors remains negative as of October 2020, compared to 68% on stable outlook, Moody’s pointed out.
Within Asia ex-Japan, Moody’s outlook is stable for all four major sectors — telecom, China property, steel and power — and also broadly for corporates across the specific markets of China, India, Indonesia and Korea, the firm added.
Most rated companies in Asia (ex-Japan) will maintain solid access to funding, although refinancing risk remains for lower-quality companies with weak liquidity, Moody’s said.
This is also reflected in Moody’s Asian Liquidity Stress Indicator, which despite some slight improvements in recent months remains well above long-term averages, the firm added.
Moody’s outlook for Asian ex-Japan non-financial companies reflects its expectations for fundamental business conditions for this sector over the next 12-18 months, and does not reflect its outlook for individual issuers, the company noted.