Moody's: Asian Liquidity Stress Index drops to 24.4% in July

Moody's Investors Service says that its Asian Liquidity Stress Index (LSI) dropped to 24.4% in July, from 25.2% in June.

The decline came as the number of rated high-yield companies with Moody's weakest speculative-grade liquidity (SGL-4) score decreased to 30 from 31, while the number of rated high-yield companies remained at 123.

The indexwhich increases when speculative-grade liquidity appears to decreaseremains well below the record high of 37% reached in December 2008 amid the global financial crisis.

"Liquidity in Asia is generally weaker than in other regions, partly because its debt capital markets are not as mature," says Brian Grieser, a Moody's Vice President and Senior Analyst.

"Asian corporates tend to rely more on local bank markets for uncommitted funding, and relationship banking that involves rolling over of short-term and uncommitted credit, which is far more common in the region than elsewhere." adds Grieser.

The liquidity stress sub-index for Chinese speculative-grade companies dropped to 27.0% in July from 28.6% in June as the number of Chinese companies with SGL-4 scores decreased to 17 from 18, while the total number of high-yield Chinese companies remained at 63.

Elsewhere in the region, the Indonesian sub-index remained elevated at 16.7% as the number of Indonesian companies with SGL-4 scores stayed unchanged at 4 and the total number of high-yield Indonesian companies remained at 24.

In addition, Moody's downgrade/upgrade ratio declined to 0.5x for July 2015, well below the ratio of 1.5x for Q2 2015, and lower than the 12 month trailing average of 2.0x. Upgrades have now exceeded downgrades for the past two months and is of note as upgrades have not exceeded downgrades in a single quarter since Q2 2011.

However, Moody's notes that 28.5% of its rated speculative-grade companies have negative-leaning outlooks. This is the highest level since December 2012 but well below the peak 43.2% posted in Q4 2008.

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