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."
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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