Moody's: Asian LSI improves slightly to 30.9% in January from 31.1% in December

Moody's Investors Service says that its Asian Liquidity Stress Index (LSI) fell slightly to 30.9% in January 2016 from 31.1% in December 2015 due to an increase in the number of issuers. The number of rated high-yield companies with the weakest speculative-grade liquidity score of SGL-4 remained at 38 month-on-month, while the net number of rated high-yield companies increased to 123 from 122.

The index measures the percentage of high-yield companies with SGL-4 scores and increases when speculative-grade liquidity appears to deteriorate.

"The Asian LSI reading of 30.9% in January 2016 remains below the record high of 37.0% reached in December 2008, during the global financial crisis," says Brian Grieser, a Moody's Vice President and Senior Analyst.

"But the index has been steadily weakening over the past 18 months, a trend that drove the LSI index reading well above its long-term average of 21.3% and its trailing 12-month average of 26.2%," adds Grieser.

Grieser was speaking on the just-released Moody's monthly report titled "Asian Liquidity Stress Index".

The liquidity stress sub-index for North Asian high-yield issuers was at 32.0% in January 2016 compared to 32.4% in December 2015. Within this portfolio, the Chinese sub-index improved to 30.8% from 31.3%, as the number of Chinese companies with SGL-4 scores remained at 20, while the total number of high-yield Chinese companies increased to 65 from 64.

At end-January 2016, the Chinese high-yield property sub-index remained at 23.7% month-on-month, as the number of companies with SGL-4 scores remained at 9, and the total number of rated property developers remained at 38.

The Chinese high-yield industrial sub-index improved to 40.7% from 42.3%, as the number of industrial issuers increased by one to 27, while companies with SGL-4 scores remained at 11.

As for the liquidity stress sub-index for South & Southeast Asian high-yield issuers, the reading remained at 29.2% month-on-month.

The Indonesian sub-index was also flat at 23.8%, as the number of Indonesian companies with SGL-4 scores remained at 5 and the total number of high-yield Indonesian companies remained at 21.

During January 2016, Moody's downgraded three high-yield issuers, continuing the trend that has seen downgrades exceed upgrades every quarter since Q2 2013.

Across Moody's portfolio of 123 rated high-yield issuers, the percentage of negative leaning outlooks -- meaning ratings with either a negative outlook or on review for downgrade -- increased to 35.8% in January 2016 from 32.8% in December 2015, the highest level since December 2012. The increase was driven by the nine reviews for downgrade initiated in the Oil & Gas and Metals & Mining sectors.

Rated high-yield bond issuance remained weak, with two bond deals closing during January 2016. These deals involved Chinese property companies, raising a total of $560 million.

At 31 January 2016, Moody's rated 123 speculative-grade non-financial corporates in Asia (excluding Japan) covering $63.1 billion of rated debt.