Asian liquidity stress index erodes in March: Moody's

According Moody's Investors Service's, the LSI now stands at 15.5 per cent, or 15 of the 97 issuers in the speculative-grade portfolio demonstrating weak liquidity, compared with 14.6 per cent, or 14 out of 96 issuers, in February.
 Liquidity levels are tied to corporate default rates. Companies with relatively low levels of liquidity are
also likely to have a low Corporate Family Rating (CFR).
 In the US, the index inched up to 4.2 per cent in March from 4.1 per cent in February. The index remains at historically low levels and near the record low 3.9 per cent seen between June and August, 2011.
 "The deterioration in March was again largely the result of weakening liquidity profiles, particularly of Chinese corporates and more specifically of Chinese property developers. More than one in four of  the high-yield Chinese property companies we rate is considered to have weak liquidity," said Laura Acres, a Moody's vice president and senior credit officer.
 "Overall liquidity in Asia remains strong relative to the high point of 37% in the fourth quarter of 2008, the peak of the global financial crisis. However, it is now at the highest level since October 2010 and there have been four months of consecutive, marked erosion," she added.
  The Asian LSI measures the percentage of companies with the lowest speculative-grade liquidity score (SGL-4), and increases when corporate liquidity appears to deteriorate.
 Liquidity in Asia is generally weaker than in other regions, partly because its debt capital markets aren't as mature as those in some other  regions, and because they rely more on local bank markets for funding. The total amount of rated debt outstanding in March increased slightly, to US$43.5 billion from $40.4 billion in February.
 Looking ahead, Moody's expects markets in Asia to remain uncertain, due to ongoing concerns about the euro area sovereign debt crisis and a more general economic slowdown, which has made investors more cautious.
However, the market has reopened, with most deals being oversubscribed and the two new deals; Mongolia Mining Corp was the first corporate rated deal out of Mongolia, while Alam Sutera was one of the lowest-rated
first time issuers in the region to raise US dollars. Moody's expects more high-yield debt deals to flow through in the coming weeks and months.
 Moody's expects that $4.2 billion of bonds from rated issuers (including domestic and cross-border bonds and convertibles) will fall due this year and that much of this will need to be refinanced. Some US$871 million of
the total $4.2 billion of debt is to be refinanced by six issuers rated B3 and below: to date no Asian issuer has successfully raised a dollar-denominated bond while at this rating level or below.