20% APAC non-fin cos in high risk due to Covid-19: Moody's

Only 20 per cent of the non-financial companies in the Asia Pacific (APAC) region face high exposure to coronavirus disruptions and the resultant credit risks, Moody's Investors Service said on Thursday.

It noted that while these 20 per cent companies face high risks from the pandemic as they are sensitive to shifting consumer demand and global travel restrictions, 36 per cent face moderate exposure and 27 per cent of them stare at refinancing risks.

"We have identified six sectors as the most affected by the coronavirus outbreak, namely airlines, auto OEMS and auto parts supply, oil & gas producers, gaming, global shipping, discretionary retail and hospitality," the report said.

Also, of the 20 per cent high exposure companies, 67 per cent have negative outlook or are under review for downgrade, weak liquidity, or both.

"This high exposure means that these companies are likely to see their credit quality weaken or ratings affected under our current macroeconomic and oil price forecasts, noted the report which rated 483 APAC companies.

However, only a little over a quarter of them face high refinancing risks given their large debt maturities and the tightening capital markets.

Moody's also said its growth forecast for 2020 is at 3.3 per cent for China , 2.5 per cent for India, 3.7 per cent for Indonesia and 0.1 per cent for Korea. It expects a flat growth for Australia and a 2.4 per cent contraction for Japan.

It also expects the G-20 economies to experience an unprecedented shock in the first half of 2020 and real GDP to contract by 0.5 per cent as against the 2.6 per cent growth in 2019.

Additionally, oil will start to rise gradually later this year, from their current levels of below USD 30 a barrel, and average at USD 40-45 in 2020.

Most companies with moderate exposure operate in sectors closely linked to consumer and industrial activity such as realty, mining, steel, chemicals, refining and marketing.

But as much as 44 per cent companies have low exposure as they operate in industries that provide essential goods and services or have diversified business models, such as telecom and media, and IT services and engineering and construction.