ALSI remains elevated as liquidity remains weak

The ALSI remains significantly weaker than the US LSI and EMEA LSI, as relationship banking — which relies on rolling over short-term and uncommitted credit lines rather than committed levels of funding — is far more common in Asia than in the other major economic regions

HONG KONG — Moody’s Investors Service says that its Asian Liquidity Stress Indicator (ALSI) remains elevated as liquidity remains weak for 55 of Moody’s 146 rated high-yield companies, with nearly one in three rated companies carrying its weakest speculative grade liquidity score of SGL-4.

The ALSI measures the percentage of high-yield companies with Moody’s weakest speculative-grade liquidity score of SGL-4 as a proportion of high-yield corporate family ratings.

The indicator decreases when speculative-grade liquidity improves.

“The ALSI remains significantly weaker than the US LSI and EMEA LSI, as relationship banking — which relies on rolling over short-term and uncommitted credit lines rather than committed levels of funding — is far more common in Asia than in the other major economic regions,” says Annalisa Di Chiara, a Moody’s senior vice president.

Meanwhile, Moody’s South & Southeast Asian sub indicator remained steady at 43.9 percent in September from August, although down from its record high of 54.8 percent in June on improving conditions among Indonesiabased companies.

The North Asian sub indicator, on the other hand, increased to 35.2 percent in September as the China industrials sub-indicator reached a record high of 68.4 percent.

Rated high-yield issuance reached $2.5 billion in September, driving year-to-date issuance to $31.billion — on track to become the second highest annual level on record. Only China-based property developers issued rated bonds in September.

At the same time, negative bias — i.e. ratings with a negative outlook or on review for downgrade — remained at 37.7 percent in September, but well above its long-term average of 28.9 percent, indicating potential for further downgrades.