Moody's: Pressure keeps rising for Asia Pacific companies as coronavirus impact becomes clearer

KUALA LUMPUR (May 25): Moody’s Investors Service said about 22 per cent of 476 rated non-financial companies in Asia Pacific (APAC) have high exposure to coronavirus disruptions, up from 20 per cent in March, as the effects of the pandemic on companies' credit quality have become more apparent.

"Airlines, automakers and auto part suppliers, casinos, discretionary retail, and hospitality companies continue to bear the economic brunt of the outbreak, given their sensitivity to consumer demand and travel restrictions," Moody's managing director and regional head of Asia Pacific corporate finance group, Laura Acres, said in an update on the report published in April on APAC corporates' exposure to coronavirus.

"In addition, declining oil prices and weak industrial demand will continue to hurt oil and gas and shipping."

Of the 105 high exposure companies, nearly 90 per cent face negative operating conditions and already have negative outlooks or are under review for downgrade, with almost 30 per cent having weak liquidity.

"Steel and oilfield services have joined the list of sectors with high exposure, mainly because the halting of production and weakening demand from end-users have hindered steelmakers' operations, while sluggish demand and depressed oil prices are adversely affecting companies in oilfield services," said Moody's vice president and senior credit officer Kaustubh Chaubal.

Exposure is moderate for 39 per cent of companies (183), up from 36 per cent in March. Most of these companies operate in the mining, property, refining and marketing, chemical, protein and agriculture sectors with just 4.0 per cent having weak liquidity.

On the other end of the scale, exposure is low for 39 per cent of companies (188), which include companies providing essential services or those with diversified business models, such as information technology, telecommunication and media, and engineering and construction companies.

Moody's looked at a handful of factors to assess each company's exposure, including links with affected regions as well as vulnerability to supply chain disruptions. The level of exposure indicates the potential for each company's credit quality or ratings to be hurt by the pandemic.

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