KUALA LUMPUR: Moody's Investors Service's proprietary indicators show credit quality is weakening while difficult market conditions are driving higher pricing and shorter tenors.
It said on Friday risks will rise in 2019 for the credit quality of Asia's high-yield bond market because the liquidity positions of issuers are weakening.
"Moody's proprietary indicators for credit quality -- including our Asian Liquidity Stress Indicator (ALSI) -- all weakened in Q4 2018," said Annalisa DiChiara, a Moody's vice president and senior credit officer.
"Furthermore, rated high-yield bond issuance in Asia in 2018 was largely shut to all but the China property sector, and also showed higher coupon rates and shorter tenors as the credit environment worsened," she said.
Moody's conclusions are contained in its just-released report, "Non-financial corporates: Asia High-Yield Interest Chartbook, Q4 2018".
The proportion of companies rated B3 and below rose to 15.7% in Q4 from 13.6% in Q3. At the same time, the ALSI -- which rises when liquidity weakens -- reached an all-time high of 38.6% in December.
“Despite these weakening metrics, Moody's believes refinancing risks for the high-yield sector remain manageable, and -- in the absence of exogenous shocks -- the market is likely to absorb upcoming maturities,” it said.
Moody's Asian high-yield portfolio covered 166 rated companies with US$89.6bil of rated debt outstanding at Dec 30, 2018.