Record $9.1 bn in Asia high-yield bonds is­sued

The Nation - - BUSINESS -

THE Asian high-yield bond mar­ket has shown a record level of is­suance for the first nine moths of this year, while re­fi­nanc­ing risk is man­age­able and the de­fault rate for all of the year will re­main low, Moody's In­vestors Ser­vice says.

“A to­tal of US$9.1 bil­lion was is­sued in the third quar­ter, rais­ing is­suance through end-Septem­ber to US$30.7 bil­lion, a record high level for the first nine months of the year,” said An­nal­isa DiChiara, a Moody’s vice pres­i­dent and se­nior credit of­fi­cer.

“In­vestor tol­er­ance for low credit qual­ity and is­suers' re­fi­nanc­ing needs con­tin­ued to drive is­suance in the Asian high-yield mar­ket.

“Al­though the num­ber of B3-rated com­pa­nies and be­low fell to 15.4 per cent at Septem­ber 30 from 17.8 per cent at June 30, as the num­ber of cor­po­rate fam­ily rat­ings (CFRs) climbed to 143 from 129 in this pe­riod, with a ma­jor­ity of new rat­ings as­signed CFRs at B1 or be­low.”

Moody's con­clu­sions are con­tained in the lat­est edi­tion of its “Asian High-Yield In­ter­est Chart­book”.

The re­port says that re­fi­nanc­ing risks re­main man­age­able as, ab­sent any ex­oge­nous shocks, the mar­ket has the ca­pac­ity to ab­sorb up­com­ing ma­tu­ri­ties.

A to­tal of US$5.6 bil­lion of rated bonds will ma­ture by Septem­ber 30, 2018, and US$123.2 bil­lion of rated and un­rated bonds will ma­ture through to 2021.

A to­tal of 10 is­suers ac­counted for 38 per cent of the US$77.2 bil­lion of rated debt out­stand­ing at Septem­ber 30.

More­over, Moody's Credit Tran­si­tion Model (CTM) fore­casts that the trail­ing 12-month high-yield non-fi­nan­cial cor­po­rate de­fault rate for Asia in 2017 will re­main low at 2.9 per cent.

The de­fault rate was 1.5 per cent at end-June 2017, lower than 4.9 per cent at end-June 2016, and was in line with the de­fault trend in global and US port­fo­lios.

Pres­sure on met­als and min­ing is­suers is eas­ing, while tech­nol­ogy is­suers face rel­a­tively higher de­fault risk.

While the Asian Liq­uid­ity Stress In­di­ca­tor in­creased to 27.3 per cent at Septem­ber 30 from 25.6 per cent at June 30, the rise re­flected both newly rated cor­po­rates look­ing to re­fi­nance up­com­ing ma­tu­ri­ties and the in­creas­ing re­fi­nanc­ing risks of some ex­ist­ing is­suers.

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