Asian high-yield corporate default rate to stay low,
Moody's Investors Service says its Credit Transition Model anticipates that the Asian high-yield corporate default rate will stay at a low 3.1 per cent for all of 2015.
"The forecast reflects our central macroeconomic scenario that the recovery in the US and, to a lesser extent, the euro area and Japan will be offset by the ongoing slowdown in China, as well as the low or even negative growth in Latin America," said Clara Lau, a Moody’s group credit officer.
"Performance of Chinese corporates, in particular in cyclical industries or sectors with excess capacity, such as steel, metals and mining, commodities trading and property development will stay pressured, due to China’s slowing economic growth," Lau said.
"However, continued monetary policy easing by the Chinese government will help to prevent an escalation of corporate defaults."
Moody’s analysis is contained in its just-released report titled "Default Report: Asian Non-Financial Corporate High-Yield Default Rate Will Stay Low over the Near Term", authored by Lau.
The trailing 12-month high-yield default rate for Asian non-financial corporates was at 3.6 per cent at the end of July, a slight fall from the 3.9 per cent at the end of last year. The high-yield default rate for Chinese non-financial corporates was 6.7 per cent, up from 5.1 per cent at the end of 2014.
In the seven months between January and July, three issuers in Asia defaulted; two of them were Chinese firms and the third was Indonesian.
By industry, two of the three defaulters operated in the coal-mining sector, reflecting the ongoing challenges facing the industry. The third was a Chinese property company.
The low Asian high-yield default rate of 3.1 per cent forecast for the 12 months ended December 31, 2015, is in line with Moody’s global default forecast of 2.7 per cent for the same period, which is low when compared with the historical global average of 4.5 per cent. The benign default outlook for global corporates is supported by fundamental credit metrics, such as healthy liquidity levels and manageable maturity profiles.
