Defaults among high-yield nonfinancial companies in the Asia-Pacific will slightly decline but stay elevated in 2022, said Moody’s recently.
This reflects the global economy's expected transition toward more stable growth as the pandemic recedes, less accommodative monetary policies, and the continuing liquidity pressure facing Chinese property companies, the credit rating agency noted.
"We forecast the APAC high-yield nonfinancial companies default rate to be at 6.2% for full-year 2022, slightly lower than the 7.5% trailing 12-month default rate at the end of 2021, but higher than the pre-pandemic level and the average 3.9% for the past 10 years," said Clara Lau, a Moody's Senior Vice President and Group Credit Officer.
Economic recovery in the US and China (A1 stable) will continue to underpin recovery in APAC, which will stabilize despite risks from the pandemic and secular trends, according to the firm.
Fiscal policy across countries will shift from accommodative to strengthening long-term growth potential and debt sustainability, said Moody’s.
As inflation rises, central banks will gradually tighten monetary policy and normalise interest rates, removing the liquidity support put in place earlier in the pandemic without impeding growth, the firm predicted.
Liquidity will generally improve for companies in the region, albeit to different extents across sectors and countries, the firm said.
Liquidity availability for most Chinese state-owned enterprises and financially strong companies will be stable, but liquidity access for property developers and financially weak companies will remain constrained, Moody’s added.
In addition, their access to offshore funding markets will remain restricted for some time, and they may have only limited alternative funding options, such as asset sales, equity raisings and/or shareholder support to address their refinancing needs, Moody’s noted.