Moody's expects low high-yield default rate
The high-yield default rate for non-financial corporations in Asia-Pacific ex-Japan will end the year at a low 1.6 per cent, which is below the February forecast of 2 per cent, based on Moody's Investors Service's credit transition model.
"The predicted default rate anticipates a continued narrowing of the high yield spread and stability of the high-yield corporate portfolio," Clara Lau, a group credit officer, said yesterday.
The proportion of ratings with negative outlooks fell significantly to 22 per cent last month from 37 per cent at the end of last year.
"The low estimated default rate of 1.6 per cent translates into one or two defaults for all of 2013," she said.
"The forecast is also based on our assessment that if quantitative easing in the US recedes, it will be measured and not materially disrupt credit markets.
"We expect quantitative-easing programmes in the US to continue into 2014."
The low estimated default rate also reflects Moody’s assumptions of continued gradual growth for advanced economies and sustained but slower growth for major emerging economies such as China.
The average rating of companies in Moody’s high-yield portfolio remained at "B1/B2" as of the end of August, similar to end-2012.
In terms of rating transitions from August 2012 to July this year, Asian investment-grade firms also displayed lower rating volatility than their global peers.
While the rating trend for global corporations is generally negative, the opposite was true for Asian firms. There were more multiple-notch rating movements for global corporations than for Asian firms, across all rating categories.
