Record $9.1 bn in Asia high-yield bonds issued
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.