Moody's Investors Service says its Asian Liquidity Stress Index reversed direction in June, declining to 23.6 per cent after jumping to 24.4 per cent in May.
The change reflects a net decrease of one (to 29) in the number of companies with the service’s lowest (weakest) speculative-grade liquidity score (SGL-4). The net number of high-yield rated companies remained at 123.
“The index – which increases when speculative-grade liquidity appears to decrease – remains well below the record high of 37.0 per cent reached during the fourth quarter of 2008 amid the global financial crisis,” said Annalisa Di Chiara, a Moody’s vice president and senior analyst.
However, it is slightly above the index’ long-term rolling average of 20.2 per cent and its trailing 12-month average of 21.5 per cent, added Di Chiara, who was speaking on the release of Moody’s latest report on the index.
The liquidity sub-index for Chinese speculative-grade companies decreased slightly to 26.5 per cent in June from 26.9 per cent in May, as the number of high-yield Chinese companies rose to 68 from 67. Meanwhile, the number with an SGL-4 score remained at 18 in June.
China’s high-yield property sub-index also declined, to 21.4 per cent from 22.0 per cent, as the number of companies rose by one to 42.
“We also introduced a new sub-index for Chinese industrials covering 26 companies in this category,” Di Chiara said.
“It is worth noting that liquidity for Chinese industrials is far weaker than that for Chinese property developers and has reached a historical high. Nine of the 26 companies have SGL-4 scores, which makes the sub-index 34.6 per cent.”
Many of the issuers in this segment are in commodity-related and heavy-manufacturing-based industries, which have seen negative trends in fundamentals, reducing cash flows and liquidity levels.
By contrast, the Indonesian sub-index rose to 8.0 per cent from 7.7 per cent as the number of speculative-grade Indonesian companies declined by one to 25.
Moody’s had assigned speculative-grade ratings to 123 non-financial companies in Asia (excluding Japan and Australia) covering US$68.5 billion of rated debt by end-June, compared with 123 companies and $67.9 billion of rated debt by end-May.