Asian Corporates default rates to low

Global rating agency Moody’s says that the high-yield default rate for Asia Pacific (exJapan) corporates will — according to Moody’s Credit Transition Model (CTM) — remain at a low level of about 2% in 2013.

“The estimate is based on the assumptions that forecasted high yield spread will remain largely stable and the Asia Pacific (exJapan) GDP-weighted average unemployment rate will stay at similar level to that of 2012 at around 4.5%,” according to Clara Lau, a Moody’s Group Credit Officer.

Lau was speaking on the release of Moody’s Special Comment titled “2013 Asian Corporates High-Yield Default Rates to Stay Low”, and which she authored.

“The expectation of a continued low default rate for 2013 strongly depends on ongoing accommodative monetary policies allowing access to capital markets as many Asian speculative-grade corporates rely on short-term funding to support operations and refinancing,” says Lau.

“The 2013 estimate of 2% is slightly above the 0.9% recorded for 2012, despite Moody’s broadly stable outlook for the region and the corporate sector. The expected rise will primarily be driven by the overall credit deterioration in Moody’s-rated portfolio in 2012,” says Lau. During last year, the average rating for the speculative- grade portfolio fell to B1/ B2 at end2012 from Ba3/ B1 at the beginning of 2012 because of a large number of negative actions, primarily for Chinese issuers.