High-yield issuers must pay up as risks increase

Investors are demanding higher compensation due to the potential rise in Asian corporate defaults, mounting geopolitical risks and a China slowdown.

Looming corporate defaults, escalating geopolitical risks and a slowdown in China’s economy is leading to a rise in the cost of financing for high-yield borrowers, prompting investors to exercise caution and demand higher compensation.

The trailing 12-month high-yield default rate for Asia-Pacific corporates as of end-July was 4.1%, up from 2.2% at end-2013, according to a recent Moody’s report. The default rate for the sector is expected to peak at 4.3% in September.

The rise in the default rate reflects the slowing of the Chinese economy as it rebalances and credit stays tight, the rating agency added. Also, Asean economies, particularly those that are commodity reliant, are...

¬ Haymarket Media Limited. All rights reserved.

FinanceAsia has updated its subscription model.

Registered readers now have the opportunity to read 5 articles from our award-winning website for free.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team (2-10 users), or office-wide licences.

To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222

Article limit is reached.

Hello! You have used up all of your free articles on FinanceAsia.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team (2-10 users), or office-wide licences. To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222