Moody's Investors Service recently said that its Asian Liquidity Stress Indicator (ALSI) weakened further to 32.7% in January 2020 from 31.8% in December 2019, reflecting weakening across all sub-indicators except China property.
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, Moody’s noted.
“The ALSI weakened for the third month in a row in January, as liquidity is weak for 49 of the 150 high-yield companies that we rate, compared to 47 out of 148 companies in December,” said Annalisa Di Chiara, a Moody's Senior Vice President.
The North Asia sub-indicator weakened marginally to 34.9% in January from 34.6% in December, driven by weakening liquidity among Chinese industrials, the rating agency pointed out.
“In particular, the Chinese industrial sub-indicator climbed even higher registering its weakest level on record of 65.8%,” said Di Chiara.
Meanwhile, the South & Southeast Asian sub-indicator also weakened to 27.3% from 25.0% over the same period, reflecting tightening liquidity among rated Indonesian companies, according to Moody’s.
While January's US$13.2 billion of issuance marked the highest monthly amount on record, the average weighted coupon was elevated at around 9.8%, primarily reflecting higher coupons for the $5.1 billion of issuance from B2-rated Chinese property developers, the firm added.
Liquidity in Asia is weaker than in the US or Europe, the Middle-East and Africa, because companies in Asia depend more heavily on relationship banking, which relies on rolling over short-term and uncommitted lines of credit rather than providing committed levels of funding, Di Chiara observed.