Moody's said recently that its proprietary indicators for the second quarter of 2021 have continued to improve, pointing to stabilising credit fundamentals as companies emerge from pandemic difficulties, although headwinds remain for weakly-positioned companies.
Most of our proprietary indicators have improved to similar readings prior to the COVID-19 outbreak, Annalisa Di Chiara, a Moody's Senior Vice President pointed out.
The Asian Liquidity Stress Indicator (ALSI) reading, which measures rated high-yield companies with weak liquidity, returned to pre-pandemic levels in June 2021, at 30.9%, she said.
Meanwhile, negative bias – companies with negative outlook or on review for downgrade – remains largely unchanged from March at 29.5%, which is aligned with the long-term average for the region," she added.
Still, the B3 negative and lower list remains elevated at 13.0% as of the end of June, up slightly from 11.8% as of the end of March, although the bulk consists of defaulted companies that have yet to complete their restructuring and remain in the Caa/Ca category, the credit rating agency observed.
Chinese property developers continue to account for the majority (65%) of the US$145 billion of bonds (rated and unrated, based on earliest puttable date) due through 2022, according to Moody’s.
Weakly positioned companies with upcoming maturities may be challenged to access the US dollar bond-market particularly given the weaker investor sentiment, the firm noted.
Meanwhile, the covenant quality (CQ) scores for Asia's full-package high-yield bonds improved to 3.44, despite a deterioration in the average CQ score for Chinese property bonds to a new all-time weakest score of 3.86 in Q2 from 3.67 in Q1, the firm added.
Issuance stayed healthy in Q2 at around $8 billion, with B-rated companies accounting for 64% of issuance, Moody’s pointed out, adding that rated issuance in H1 2021 was around US$21 billion, the second-highest H1 issuance on record (the highest being H1 2019's US$32.4 billion).