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Moody’s: Ratings trend for Asia corporates stays negative in 2Q

Hong Kong, July 30, 2012 — Moody’s Investors Service says that the rating trend for non-financial corporates in Asia Pacific was negative in the second quarter of 2012, continuing a trend that now spans four consecutive quarters.


“The negative rating trend in the quarter primarily reflected the adverse impact of weak global demand, given the prolonged and unresolved euro area debt crisis, the weaker-than-expected recovery in the US, and, importantly, the slowing growth of the Chinese economy,” says Clara Lau, a Moody’s Group Credit Officer.


“For the rest of the year, we expect negative pressure to continue for Asian issuers, as their operating and financial performance will be affected by the continued weakness in global demand and the overcapacity in some industries,” Lau adds.


Lau was speaking on the release of Moody’s quarterly review of rating actions on corporates in the Asia Pacific. The report is titled, “Rating And Outlook Trends For Asia Pacific Corporates 2Q 2012 Remained Negative.”


‘The extent to which the negative trend will intensify or moderate will depend mainly on two factors: the development of the euro area sovereign crisis and the strength of China’s economic growth, ” says Lau. ”

However, we expect availability of credit will ease somewhat, benefiting some sectors, as governments in Asia cautiously loosen some monetary measures to spur demanding as inflationary pressures abate,” adds Lau.


According to the report, the number of negative actions of Asian corporates in the quarter was 15 versus 5 positive actions. However, the number was markedly lower than the 26 negative actions in the previous quarter. “Speculative grade issuers accounted for 67% of the total negative actions. Rated Chinese issuers accounted for about 80% of the negative actions on the speculative grade issuers, with industrial companies and property developers each contributing an almost equal share,” says Lau.


In Japan, there were 2 negative rating actions in the second quarter, versus 5 in the first quarter, and no positive rating action. Japanese industrial corporates continue to face a very challenging environment, given the lackluster global economic growth and weakening competitiveness due to the persistently strong yen. The negative bias in actions for Japanese issuers will continue, although the trend is likely to moderate.


For the Australia and New Zealand portfolio, the trend was relatively stable during the quarter. There were 2 negative rating actions and 1 positive action and which were mainly prompted by company-specific factors. Moody’s expects the trend to remain broadly stable but with increasing divergence between the resource and non-resource sectors.


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