Moody's: Asian LSI deteriorates in March to 32.2%; worst monthly result since March 2009

Moody's Investors Service says that its Asian Liquidity Stress Index (Asian LSI) rose to 32.2% in March 2016, reaching its highest level since March 2009.

The number of Moody's-rated high-yield companies with the weakest speculative-grade liquidity score of SGL-4 increased to 39 in March 2016 from 38 in February 2016, while the total number of Moody's-rated high-yield companies fell to 121 from 123 over the same period.

The index measures the percentage of high-yield companies with SGL-4 scores and increases when speculative-grade liquidity appears to deteriorate.

"The Asian LSI is at elevated levels because of the weakening trends in corporate liquidity across Asia," says Brian Grieser, a Moody's Vice President and Senior Analyst. "Companies in the oil & gas, metals & mining and related sectors account for in excess of 40.0% of the SGL-4 scores in our Asian liquidity index."

"The 32.2% reading is approaching the record high of 37.0% reached in December 2008 amid the global financial crisis, and is higher than the trailing 12-month average of 27.6%," adds Grieser.

The liquidity stress sub-index for North Asian high-yield issuers was at 33.3% in March 2016 compared to 31.6% in February 2016. Within this portfolio, the Chinese sub-index rose to 33.8% from 31.8%, as the number of Chinese companies with SGL-4 scores increased by one to 22, while the total number of high-yield Chinese companies decreased to 65 from 66.

The Chinese high-yield property sub-index remained at 23.7% in March 2016 on a month-on-month basis.

As for the Chinese high-yield industrial sub-index, the reading rose to 48.1% from 42.9%, as the number of industrial companies fell by one to 27, while companies with SGL-4 scores increased by one to 13. Moody's notes that this sub-index reached its highest level for the second consecutive month.

The liquidity stress sub-index for South and Southeast Asian high-yield issuers rose to 30.4% in March 2016 from 29.8% in February 2016. The 30.4% reading was at the highest level since Moody's created the sub-index at the end of 2010 and was the result of a lower number of high-yield companies (46) in March 2016 compared with the 47 seen in February 2016.

The Indonesian sub-index was flat at 23.8% in March 2016 on a month-on-month basis, because the number of Indonesian companies with SGL-4 scores remained at five and the total number of high-yield Indonesian companies remained at 21.

Overall, Moody's says the number of rating downgrades outnumbered the number of upgrades. In particular, three high-yield companies were downgraded in March 2016, closing out Q1 2016 with 13 downgrades and no upgrades. Moody's notes that Q1 2016 represents the first quarter since Q2 2008 that has registered a lack of upgrade rating actions.

Across Moody's portfolio of 121-rated high-yield issuers (excluding Japan), the percentage of negative leaning outlooksmeaning ratings with either a negative outlook or on review for downgradefell slightly to 38% in March 2016 from 39% in February 2016; but remains the second-highest tally since December 2012.

While Moody's has assigned SGL scores to all 121 Moody's-rated speculative-grade companies, only 92 of these companies demonstrated rated debt outstanding at 31 March 2016. Such debt totaled $62.5 billion as of the same date.

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