The coronavirus-triggered global recession will continue to pressure Asia Pacific non-financial companies, with negative credit trends to persist through the rest of 2020, said Moody's Investors Service recently.
"We expect the recovery from this recession to be prolonged, although the easing of lockdown measures should support a gradual recovery in H2,” said Clara Lau, a Moody's Group Credit Officer and Senior Vice President. “The ability of businesses to recover will depend on the pace at which consumer demand rebounds, which in turn hinges on governments' ability to restore confidence by reducing fear of contagion.”
Fiscal and monetary stimulus programs in both advanced and emerging markets have helped stabilise financial markets and provided temporary relief to companies, Lau pointed out.
However, the operating performance and financing capability of companies are vulnerable to financial market shocks, particularly if a second wave of infections results in renewed lockdowns, She noted.
The rating trend in Q2 2020 remained negative across Moody's Asia Pacific rated corporate portfolio, although the number of negative rating actions has decreased, according to Moody’s.
Moody's took 86 negative actions in Q2, down from 120 in Q1. Of these, 18 were sovereign-driven, related to India's sovereign downgrade.
Excluding sovereign-driven actions, metals and mining, energy and property accounted for the most among the negative actions, with each sector receiving nine, said Moody’s, adding that there were no positive rating actions in Q2 2020.
Meanwhile, among the ratings in Moody's Asia Pacific corporate portfolio, 29% had negative implications, up from 26% in Q1 2020 and the highest level since Q3 2016.
Companies that remain the most affected were auto and gaming companies, with over 50% of issuers carrying ratings with negative implications, the rating agency said.
At the same time, the share of ratings with a stable outlook fell to 69% from 71% over the same period, the firm added.
There were also five rated defaults in Q2 2020, among which three were Chinese companies and two were Australian, while the five defaults bring the total number of rated defaults in H1 2020 to eight, Moody’s noted.