Moody's Investors Service said recently that its Asian Liquidity Stress Indicator (ALSI) slightly weakened in December 2019 to 31.8% from 30.7% in November 2019, reflecting weakening across all sub-indicators during the month.
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.
"The ALSI increased for the second month in a row in December, as liquidity is weak for 47 of the 148 high-yield companies that we rate, compared to 46 out of 150 companies in November,” said Annalisa Di Chiara, a Moody's senior vice president.
The higher ALSI primarily reflects two additional companies with tightening liquidity profiles, and the withdrawal of two other companies from Moody's assessment, one of which had weak liquidity.
"In particular, the Chinese industrial sub-indicator climbed even higher registering its weakest level on record of 64.9%," Di Chiara noted.
Moody's report points out that the North Asia sub-indicator weakened to 34.6% in December from 33.3% in November driven by weakening liquidity among Chinese industrials.
Although the increase was marginal, the South & Southeast Asian sub-indicator also weakened to 25.0% from 24.4% over the same period, reflecting tightening liquidity among rated Indonesian companies, the rating agency said.
In addition, 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, Moody’s noted.