Moody's launches global EM liquidity stress index

  • Business
  • Thursday, 25 Apr 2019

KUALA LUMPUR: Moody’s Investors Service has launched its global emerging markets (EM) liquidity stress index (LSI).

The rating agency said on Thursday the index measures the percentage of high-yield companies in EMs with the weakest speculative grade liquidity score of SGL-4, as a proportion of EM high-yield corporate family ratings.

Laura Acres, a Moody’s managing director, said the inaugural global EM LSI score was weak at 20.3% and above the long-term average of 18.9%, with the long-term average based on LSI scores between January 2017 and March 2019.

“Nevertheless, the score has fallen for three consecutive months; representing a slight improvement in liquidity across EMs globally.

“The score of 20.3% balances the weak liquidity seen in the EM Asia Pacific LSI of 39.1%, with the stronger liquidity in the EM Emerging Europe LSI of 2.9% and EM Latin America LSI at 8.5%,” Acres added.

A Moody’s vice president and senior credit officer Annalisa Di Chiara pointed out the EM Asia Pacific LSI had consistently been the weakest sub-indicator “and as the largest component of the EM LSI, it dictates trends for the indicator”.

“Despite the slight improvement in the EM Asia Pacific LSI to 39.1% in March 2019 from 40.6% at December 2018, the global EM LSI remains elevated at 20.3%,” Di Chiara said.

Moody’s points out that the improvement in 2019 reflects a high level of debt issuance in China.

Proceeds from Q1 issuance were largely used to refinance existing debt, improving liquidity scores in Asia Pacific.

The global EM LSI included 311 companies from 39 countries at March 31, 2019. 

The indicator for Asia Pacific is the largest with 133 companies, followed by Latin America with 94 companies, Emerging Europe with 69, and Africa and the Middle East with 15.

The EM LSI is part of Moody’s comprehensive and focused research on EM which kicked off last year with the publication of the EM Chartbook. 

EMs are increasingly forming a larger part of the investment space and Moody's has endeavored to provide investors with comparative ratings data across key EM regions and groupings such as Brazil, Russia, India, China and South Africa (BRICS), and Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS), as well as across key industries.
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