Moody's expects negative rating trend for Asian corporates in 2012
A moderately negative ratings trend is expected for Asia's rated, non-financial firms, amid a challenging operating environment of slower growth in both developed and emerging economies, according to Moody's Investors Service.
"Looming sovereign-credit and financial crises have subdued business sentiment and consumer confidence, while expected austerity measures in developed economies further constrain prospects for economic growth in
Asian countries that depend on exports," said Simon Wong, a Moody's Vice President and Senior Analyst.
"Similarly, reduced investor appetite for high-yield names, arising partly from concerns over corporate governance and tighter lending conditions, will restrain the prospects for Asian corporate issuers."
Wong co-authored Moody's special report on corporate issuers in Asia, entitled "Review of 2011 and Outlook in 2012 for Corporate Issuers in Asia (ex Japan): Risks will Test Corporate Fundamentals".
The report notes that certain sectors and firms are at greater risk. These include, Chinese property developers, and the regional steel, oil & gas refining & marketing, as well as technology and semiconductor sectors. These are sectors most vulnerable to adverse policy tightening,cyclicality, and excess capacity.
Moody's also expects bonds to replace some bank lending, and overall capital costs to rise. The availability of credit will tighten due to deleveraging by banks in developed markets, and risk aversion among investors and lenders.
As loans become more expensive or harder to come by, domestic bond markets and an emerging, offshore Renminbi or "dim-sum" market will fund an increasing share of Asian companies' financial needs.
Finally, default rates are likely to rise again after a two-year low, in-line with the moderate increase predicted for global speculative-grade defaults.
