Negative rating trend to continue for the rest of 2016. The share of ratings with negative implications 1 for Asia Pacific non-financial corporates stayed high at 35% at end-2Q 2016, up slightly from the 34% registered at end-1Q 2016.
The share of ratings with stable outlooks — at 60% — represented the lowest proportion over the last 10 quarters since 1Q 2014. The share of ratings with stable outlooks for Asian and Japanese corporates was similar and that for Australian issuers was relatively better, with 75% of company ratings carrying stable outlooks at end-2Q 2016 and 23% showing negative implications.
Asia Pacific non-financial corporate rating trend stayed negative in 2Q 2016, with 14 positive and 27 negative rating actions. By region, Chinese corporates remained the main driver of negative actions, accounting for 10 of 27 such actions.
By industry, property developers constituted the largest number of negative actions — with eight — followed by transportation corporates with four and retailers with two.
Three multi-notch downgrades in 2Q 2016, and three companies moved to noninvestment grade from investment grade. Canon Inc. (Aa3 stable), Yanzhou Coal Mining Co. Ltd. (B2 negative) and Australian Rail Track Corporation Limited (A1 stable) were downgraded by two notches.
As for Newcastle Coal Infrastructure Group Pty Ltd (Ba1 negative), Binhai Investment Company Limited (Ba1 negative) and Greenland Holding Group Company Limited (Ba1 negative), the three companies were downgraded to a non-investment grade rating of Ba1 from Baa3.
By industry, corporates in construction & engineering and metals & mining are the most pressured. More than 70% of companies in these two sectors show ratings with negative implications.
In addition, all companies rated by us in the natural product processing and rental services sectors show ratings carrying negative outlooks or ratings which have been placed under review for downgrade; reflecting the challenging environment faced by these industries.
Downside risks are partially mitigated by available liquidity, due to supportive policies and monetary easing measures by governments and central banks.
The operating environment for corporates in the region remains challenging, owing to weak demand and subdued investor appetite, and as such, the credit profiles of many issuers will continue to come under pressure.
Nevertheless, central banks globally are responding to an environment of subdued global growth by continuing on a monetary easing trend. Such a strategy will support funding access for many corporates and somewhat alleviate default risk.
Source: Moody‘s Investors Service
