Asian Corporate Liquidity Stress at Its Lowest Level Since October 2015

The Asian Liquidity Stress Index (LSI) is at its lowest level since October 2015. Moody’s Investors Service says its Asian LSI fell for the third straight month to 28% in February 2017, down from 29.4% in January.

The index measures high-yield companies with the weakest speculative-grade liquidity. A contributing factor for the low level is from improvements in North Asian subindices, says Moody’s Vice President and Senior Analyst Brian Grieser.

Another reason for the improvement is a strong bond issuance, which is nine times higher this year than last. In January and February, bond issuance was $5.1 billion compared to $560 million during the same timetable in 2016. Despite the improvement, the Asian LSI is still above the long-term average of nearly 23%. All North Asian subindices improved for February 2017, which includes the Chinese Property subindex. It fell from 17.5% in January to 17.1% in February.

The North Asian subindex also dropped 2.1% between the same two months. The South and Southeast Asian subindices stayed constant at 27.3% in February, as did the Indonesian subindex.

Minus Japan and Australia, Moody’s rated 125 speculative-grade nonfinancial corporates in Asia with a rated debt of more than $65 billion. The number of rated high-yield companies with the SGL-4 rating score dipped from 37 to 35 in February 2017, while the number of high-yield companies also decreased by one from 126 during the period.

– Michael Miller, editorial associate

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