Moody's Investors Service said recently that its Asian Liquidity Stress Indicator (ALSI) remains elevated as liquidity remains weak for 45 of 138 rated high-yield companies.
The ALSI measures the percentage of high-yield (HY) companies with Moody's weakest speculative-grade liquidity score (SGL-4) as a proportion of the total number of corporate family ratings, the credit rating agency noted, according to Moody’s, adding that the indicator decreases when liquidity across the portfolio broadly improves.
As of December 31, 2020, Moody's rated 145 HY companies, of which 138 are included in its indicator, the firm said.
Liquidity stress increased significantly in 2020 for the rated high-yield portfolio amid extensive coronavirus disruptions and tightening credit conditions, and despite some improvement in recent months, the ALSI remains well above pre-pandemic level of 29.4%, said Annalisa Di Chiara, a Moody's Senior Vice President.
"The ALSI also remains significantly weaker than the US LSI and EMEA LSI, as relationship banking – which relies on rolling over short-term and uncommitted credit lines rather than committed levels of funding – is far more common in Asia than in other major economic regions," Di Chiara noted.
Moody's South & Southeast Asian sub-indicator continued its improving trend to 37.5% in December from 40.0% in November and a record high of 54.8% in June, the firm said.
Meanwhile, the North Asian sub indicator remained stable at 30.6% in December, with the China industrials sub-indicator improving to 58.1% in December from 60.0% in November, Moody’s added.
Rated high-yield issuance reached US$1.2 billion in December, pushing full-year issuance to USD37.7 billion — the second highest annual level on record, with 76% of total issuance coming from China property companies in 2020, according to Moody’s.
At the same time, negative bias — ratings with a negative outlook or on review for downgrade — decreased to 37.9% in December from 38.2% in November, the firm observed.
At 55, downgrades also greatly outpaced the 9 upgrades in 2020, reflecting the impact of the coronavirus pandemic, Moody’s said.