Moody's Investors Service announced that its Asian Liquidity Stress Indicator (ALSI) registered its weakest reading on record in April, primarily reflecting the rise of the Indonesian sub-indicator amid rising refinancing risks as market access for high-yield companies remains limited.
The ALSI measures the percentage of high-yield companies with Moody's weakest speculative-grade liquidity (SGL) score of four as a proportion of high-yield corporate family ratings, with SGL-1 indicating very good liquidity and SGL-4 indicating weak liquidity and high possibility of default. The indicator increases when liquidity deteriorates.
"Liquidity remains weak for 59 of our 147 rated Asian high-yield companies, reflecting continued earnings contraction amid the coronavirus outbreak and volatile capital market conditions," Moody's senior vice president Annalisa Di Chiara said.
The South and Southeast Asian sub-indicator soared to a new record high of 51.2% in April from 46.5% in March – primarily reflecting weakening liquidity at two Indonesian companies – while the North Asian sub-indicator marginally increased to 35.6% in April from 35.5% the prior month.
"Meanwhile, year to date Asian high-yield issuance remained at $15.9 billion, with April seeing zero issuance as market access largely shut off to high-yield companies," Di Chiara added.
Liquidity in Asia continues to be weaker than in the United States or Europe, the Middle East and Africa, because companies in Asia depend more heavily on relationship banking, which relies on rolling over short-term and uncommitted lines of credit rather than providing committed levels of funding.
Re-disseminated by The Asian Banker