AsPac woes to linger, says Moody's

Moody’s Investors Service expects the Asia Pacific region to continue to experience the negative effects of the global credit crunch amid the recent developments in the United States.

“Looking ahead, access to funding will remain challenging, especially for low investment grade and speculative grade firms as already tight market liquidity is further aggravated by the financial turmoil in the US,” said Clara Lau, chief credit officer of the Asia Pacific Corporate Finance group in a recent report.

Moody’s said that negative rating actions in Asia Pacific, except for Japan, continued to outnumber positive actions in the third quarter of the year by 17 to two compared with 18 to none in the second quarter of 2008.

Lau attributed the many negative rating actions in the third quarter to the weakening financial profiles and tight liquidity.

“Behind many of the negative rating actions in the third quarter of 2008 were weakening financial profiles and liquidity, due to tougher operating conditions,” said Lau.

“Rising costs and a fall in consumer and industry demand-regionally and globally — undermined the operating performances and credit metrics of these issuers,” she said.

By contrast in the second quarter of 2008, negative actions were mainly due to a preponderance of debt-funded deals.

“During the third quarter of 2008, real estate and technology sectors accounted for most of the negative actions and, in the months ahead, technology, shipping and property firms are the most vulnerable to the global economic slowdown and continued credit crunch, while the positions of retailers are also weakening,” said Lau.

“Furthermore, the persistence of a negative rating trend since September 2007 has resulted in an overall downward rating migration for Moody’s portfolio of non-financial corporates in the Asia Pacific,” said Lau.

Recent developments in the United States, triggered by the credit crunch in its home mortgage market, have reverberated beyond American shores and have sent jitters across the globe including the Philippines.

Investment banks Lehman Brothers and Merrill Lynch have gone bankrupt.