Liquidity in Asia improved in December but still remains weak compared with long-term averages, according to Moody’s Investors Service.
The researcher’s Asian Liquidity Stress Index (LSI) fell from November’s 31.1 per cent to 30.3 per cent in December, but Moody’s vice-president and senior analyst Brian Grieser cautioned that this was still historically high.
“Despite the improvement to 30.3 per cent in December, the Asian LSI remains above the long-term average of 22.6 per cent, highlighting the continued weakness in corporate liquidity across Asia,” he said.
Moody’s assesses liquidity by measuring the percentage of high-yield companies with an SGL4 liquidity risk score (meaning companies expected to have weak liquidity for the next 12 months) and increases the LSI score when “speculative-grade liquidity appears to deteriorate”.
Liquidity sub-indexes showed differences based on region, with the North Asian sub-index improving to 32.5 per cent from November’s 34.2 per cent, but the South and South-East Asian sub-index increasing from 25.6 per cent to 26.2 per cent.
“In December, Moody's downgraded two high-yield issuers, bringing the total downgrades of high-yield issuers in 2016 to 50, compared to seven upgrades,” the company added.
“This results in an annual downgrade/upgrade ratio of 7.14 times, the highest level since the fourth quarter of 2009.”