Moody's Investors Service said that its Asian Liquidity Stress Indicator (ALSI) decreased to 38.1% in July from 39.7% in June, primarily reflecting improving liquidity at three companies and the addition of a fallen angel into its high-yield mix.
The ALSI measures the percentage of high-yield companies with Moody's weakest speculative-grade liquidity score of SGL-4 as a proportion of high-yield corporate family ratings The indicator increases when speculative-grade liquidity deteriorates., according to Moody’s.
"The pressure on companies' earnings and cash flows is likely to continue while refinancing risks are rising for some, resulting in weak liquidity for 56 of our 147 rated high-yield corporates in July — a slight improvement from 58 of 146 companies in June," said Annalisa Di Chiara, a Moody's Senior Vice President.
The improvement was primarily driven by improving liquidity at two Southeast Asian companies, which brought the South & Southeast Asian sub indicator down to 50.0% in July from 54.8% in June, the credit rating agency noted.
Meanwhile, the North Asian sub indicator improved marginally to 33.3% in July from 33.7% in June, reflecting the net addition of one company with weak liquidity, the firm added.
In addition, high-yield issuance continued to pick up in July, with rated issuance jumping to US$7 billion in July from US$2.2 billion in June, of which 67% was from China-based property companies, Moody’s said.
At the same time, negative bias — the ratings with a negative outlook or on review for downgrade — remained elevated at 40.1%, with July seeing five downgrades in Asia, the credit rating agency observed.