Defaults by Asian companies to rise this year: Moody`s

Moody’s said Friday in its credit analysis report that defaults by Asian companies will rise this year, adding, “Weakening or volatile domestic currencies will likewise increase cost pressures for importers in countries such as India and Korea.”

Moody`s warned that severe fluctuations in the won-dollar exchange rate will reduce exports and raise import prices as well as increase FX management costs for companies.

The report also said Asian companies will have difficulty raising funds due to declining demand for the continent`s high-risk and high-yield bonds. Indonesia`s largest company for oil and gas shipping froze payments on its debt, and China’s oil refining sector and property market show no signs of improving, things that Moody’s cited as unfavorable factors.

Many Asian companies with sound financial conditions, however, will have no problem in repaying or rolling over debt this year and next year, the report said. According to Moody`s, about 90 percent of rolled-over debt this year was issued by investment-grade corporate issuers, of which 77 percent are domestic bonds issued by blue chip companies.

Separately, Tim Coller, a partner at McKinsey & Co. and co-author of “Valuation,” told Yonhap News at McKinsey`s Seoul office the same day, “The latest global economic crisis will be prolonged due to national and household debt.

legman@donga.com