Negative rating trend for Asia Pacific corporates to deepen, Moody’s says

The negative rating trend for Asian non-financial corporates seen last year will worsen in 2016, according to Moody’s.

In a note to clients, the ratings agency attributed this to incremental pressure on companies' operating and financial performance, as demand weakens due firstly to China's slowing economy, and secondly to overcapacity and therefore depressed prices in the oil and commodities industries.

Clara Lau, group credit officer at Moody’s, said, “Upstream oil companies as well as metal and mining firms are the most pressured because of the protracted downturn in the oil and commodities industries.”

"Rising dollar interest rates and a slower growth outlook for Asia and in particular China could lead to capital market volatility, resulting in higher credit risk, especially for issuers with weak operating performance or liquidity.”

Nevertheless, Moody's expects that continued monetary easing by the Chinese and EU authorities will keep the liquidity of corporates in Asia Pacific "manageable."