Tuesday, July 07, 2020

Issuer defaults rise in Asia but region remains strong

Jun 28. 2019
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By The Nation

Three companies rated by S&P Global Ratings, including one confidential issuer, defaulted in Asia in 2018, up from two corporate defaults in 2017, S&P Global Fixed Income Research said on Friday.


Nevertheless, the number of rated entities in the region has continued to grow, resulting in a drop in the annual speculative-grade default rate to 0.48 per cent in 2018 from 1.18 per cent in 2017. 

Net total rated issuers grew by 9.4 per cent to 835 issuers in 2018 from 763 issuers the previous year. Newly rated issuers in the region increased by 19.4 per cent, despite growing concerns about a global economic slowdown, rising interest rates and trade tensions.

“S&P Global Ratings assigned ratings to 148 new issuers in Asia in 2018, an increase from 124 in 2017,” said Diane Vazza, head of S&P Global Fixed Income Research of the rating agency’s “2018 Annual Asia Corporate Default And Rating Transition Study”.

Speculative-grade (rated BB+ or lower) issuers account for more than half of newly rated companies in Asia, a sign of both increased risk and of the growing palatability of riskier credits in the region, which is still by and large dominated by the investment-grade category (BBB- or higher).

Together, the three defaults in Asia accounted for just 0.3 per cent of the $131.65 billion in global debt affected by the total 82 defaults in 2018. The average number of annual defaults in Asia since 1993 is 3.4, compared with a global average (since 1981) of 72.5.

Moreover, 80.6 per cent of ratings in Asia remained unchanged between January 1, 2018, and year-end, further demonstrating the relative stability of the majority of credit ratings in the region. Only 6.6 per cent of rated entities from Asia were upgraded over the course of the year, while 5.8 per cent were downgraded.

The one-year weighted average (1993-2018) Gini coefficient (a measure of the rank-ordering power of ratings over a given time horizon) for rated Asian corporate issuers was 87.0 per cent, while the one-year weighted average (1981-2018) Gini coefficient globally was 82.50 per cent.

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