"The share of Asian corporate ratings with stable outlooks continued to decrease for a fifth consecutive quarter to 60% at end-2Q2015, compared to 65% at end-1Q 2015, while the share of ratings with negative implications increased to 27% from 25% in the previous quarter," says Clara Lau, a Moody's Group Credit Officer. "At the same time, the share of ratings with positive implications increased to 13% from 10% over the same period, but the rise was mainly driven by the outlook change to positive for Korean utilities and government related institutions (GRIs) in response to the change in the rating outlook of the Korean government to positive," adds Lau.
For 2Q 2015, the credit trend for Asian corporates remained negative. Although there were more positive rating actions than negative ones (26 compared to 12), 19 of the 26 positive actions were driven by sovereign rating actions or other changes unrelated to the individual issuer's standalone credit profile. After excluding such actions, the number of positive rating actions, as a result of changes in the standalone credit profile of the individual corporate entity, totaled just seven. As a result, the adjusted ratio of positive to negative rating actions would be 0.6x , the same as that in 1Q 2105. Six out of the 12 negative rating actions for 2Q2015 were on Chinese Issuers. And five out of the 12 actions were on the property sector and related industries.
Looking ahead, Moody's expects the overall performance of Chinese corporate issuers to continue to be challenged by the slower pace of domestic economic growth.
'However, the Chinese government's monetary easing measures in recent months will prevent a surge in defaults,' says Lau. "The massive increase in government spending on infrastructure and railroads will also help stimulate China's slowing economy."
The overall credit trend for Australia/New Zealand corporates is expected to remain stable. The share of ratings with stable outlooks was 83% at end-2Q2015, which is similar to the 84% recorded as of end-1Q 2015. The share of ratings with negative implications decreased marginally to 14% from 16% and that for positive implications increased to 4% from zero in the same period. However, continued pressure on the credit quality of high-yield miners and mining services companies in Australia is expected as business conditions in the resources sector continues to decline due to subdued demand from China and excess supply.
The rating trend of Japanese corporates is expected to remain stable. The share of stable outlooks for Japanese corporates increased to 82% at end-2Q 2015, from 78% at end-1Q 2015. The share of ratings with negative implications decreased to 14% from 19% for the same period.
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Japan's economy continues to recover steadily, benefiting from monetary easing policies as well as the continued weakening of the yen and the low oil price environment. However, despite these factors, limited progress in the implementation of pro-growth reforms continues to hamper the outlook for stronger economic growth that could lead to improvements in corporate credit.
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