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Asian high-yield corporates to record low default rate at end-2017

Boris Sullivan

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Moody’s Investors Service says that the default rate for Asian high-yield non-financial corporates will remain low, registering 2.9% at end-2017.

“The low projected default rate reflects broad-based global growth, the
recovery of commodity prices, and our expectation of cautious monetary
tightening in major economies, including the US, China and EU,” says
Clara Lau, a Moody’s Group Credit Officer.

“And, the gradual normalization of monetary policy in these major economies will support near-term market liquidity,” adds Lau.

“Meanwhile, a buoyant bond market since the start of 2017 has allowed many Asian
companies to raise funds to meet their refinancing and capital needs; thereby easing liquidity pressure and lowering default risks.”

Moody’s analysis is contained in its just-released report titled “Default
Report — Asian high-yield non-financial corporates’ default rate to
remain low at end-2017,” and is authored by Lau.

On metals & mining companies which were major default contributors in the
past two years , Moody’s report says that easing pressure on such
businesses because of the bottoming out of commodity sectors and recovery
in commodity prices will help keep the overall default rate low.

Moody’s points out that the Asian trailing 12-month non-financial
high-yield corporate default rate was at 1.5% at end-June 2017. This
result was lower than the 4.9% at end-June 2016, and in line with the
default trend in Moody’s global and US portfolios.

Moody’s global and US speculative-grade default rates fell to 3.2% and
3.8% at end-June 2017 from 4.7% and 5.5% at end-June 2016.

In Europe, the default rate stayed flat at 2.7% at end-June 2017 versus
2.6% the year before.

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