The Liquidity Stress on Speculative-Grade Asian Companies Grew in August

Indonesian and Chinese industrial sectors helped worsen Moody’s Investors Service’s Asian Liquidity Stress Index (Asian LSI) in August.

The index, which measures the percentage of high-yield companies with the weakest speculative grade liquidity scores of SGL-4 and increases when their liquidity deteriorates, increased to 33.9% in August from 32.5% in July. Moody's rated 115 speculative-grade nonfinancial businesses in Asia, excepting Japan and Australia, with a total debt of $59.1 billion.

"The Asian LSI weakened further in August as both the Indonesian and Chinese industrials sub-indices hit all-time highs at 30% and 52%, respectively," said Brian Grieser, a Moody's vice president and senior analyst. "Furthermore, the Asian LSI remains at elevated levels due to weak corporate liquidity profiles across the region. Property, oil and gas, and metals and mining sectors, which account for over 50.0% of the SGL-4 scores, continue to pressure the Asian LSI.”

The index reading in August was higher than the trailing yearly average, but it remained below the record high of 37% reached in December 2008, Moody’s said.

Overall, the number of speculative-grade companies with negative-leaning outlooks fell in August to 45 from 47 in July, the ratings agency said. Likewise, the percentage of negative leaning outlooks dropped to 39.1% in August from 40.2% in July, and remains below August 2008’s peak of 44.8%.

The number of speculative-grade companies with negative-leaning outlooks decreased to 45 in August from 47 in July. Overall, the percentage of negative leaning outlooks declined to 39.1% in August from 40.2% in July, but remains below the peak of 44.8% posted in the fourth quarter of 2008.

- Nicholas Stern, editorial associate

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