Asia-Pacific Credit Markets Update –3Q 2020U.S. Credit Composite Spreads Trends (bps) 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2016 2016 20162016 2016 20172017 2017

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Asia-Pacific Credit Markets Update – 3Q 2020

Xu Han, Associate Director – Credit Markets [email protected]

Nivritti Mishra, Lead Analyst –[email protected]

Lyndon Fernandes, Analyst – [email protected]

Vince Conti, Associate Director – Credit Markets [email protected]

Sudeep Kesh, Head of Credit Markets [email protected]

Evan Gunter, Director - Ratings Performance [email protected]

mailto:[email protected]








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Financing ConditionsHighlights



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APAC | Debt Maturing Through 2025 Is Mostly Investment Grade

3

Note: Data as of July 1, 2020. Includes bonds, loans, and revolving credit facilities that are rated by S&P Global Ratings. By country excludes Mongolia , Philippines and Marshall Islands. Greater China includes mainland China, Hong Kong, Taiwan, and Macau. Source: S&P Global Ratings Research.

APAC Corporate (Financial and NonFinancial) Debt Maturities By Country (2020.2H-2025)

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Thailand

Malaysia

Indon esia

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India

Singapore

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Great er China

Australia

Japan

Financials Nonfinancials

(Bil. $)

– Investment-grade maturities peak at $240.9 billion in 2022, and much of this debt is from financial services companies.

– Issuers of speculative-grade debt have longer to refinance because these maturities do not peak until 2024, when $22.2 billion matures.

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APAC Corporate (IG and SG) Debt Maturities By Country (2020.2H – 2025)



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APAC Financing Costs| Improving Overall Conditions Could Hide Uneven Market Sentiment

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Note: Data as of September 11, 2020. Source: S&P Global Ratings Research, Bloomberg-Barclays Indices. Spreads from FRED are secondary market pricing.

• Spreads continue to compress. The widespread support from major central banks continues to combine with a gradual economic recovery in most parts of the world to generate more calm in markets. As such, spreads have tightened further since June, with the region’s investment-grade segment having largely normalized as much as the U.S. market has. Speculative-grade spreads have also come in significantly, and are now just about half the levels seen at the peak of the COVID-19 crisis, though they remain slightly over 200bps higher than at the start of 2020.

• Risk-aversion persists, especially for speculative-grade issuers. Despite significantly tightened spreads on the secondary market, patterns in APAC primary market activity continue to signal relatively restricted access to capital markets for many speculative-grade firms. The overwhelming majority of the issuance in this segment this year has been from Chinese real estate firms, with the sectoral and geographic concentration suggesting that investors are still generally more cautious.

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US IG APAC IG US HY APAC HY

US and APAC Options-Adjusted Spreads (for USD-denominated bonds, in bps)

APAC 2010-19 High (Sep 30, 2011) Beg. 2020 COVID-19 Worst Sep 11, 2020



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U.S. Credit Composite Spreads Trends

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U.S. Spreads By Rating Category

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* Option-adjusted spreads computed on a pool of over 20,000 U.S.-domiciled bonds with par values of over $100M that are rated by S&P Global Ratings. Data as of Aug. 31, 2020. Source: S&P Ratings Research; Thomson Reuters.



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Equity Pricing• When the COVID-19 pandemic was blustering around March, markets saw markedly higher volatility, indicating much

weaker investor confidence. Subsequently, various central bank actions, such as asset purchase programs, increased liquidity and helped investor confidence recover gradually as some economies start to recover, among which Asia was the first but unevenly.

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S&P 500, S&P Asia50 Index And VIX Movements In Last One Year

S&P500 (right) S&P Asia 50 (right) VIXCLS (left)

Weekly data as of Aug. 31, 2020. S&P Asia 50 index data is not available for Jan. 27, 2020. Source: S&P Ratings Research; FRED; S&P Dow Jones Indices.



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APAC Markets | Corporate Issuance

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• 2020YTD Asia Pacific corporate bond issuance (including both financial and nonfinancial) is at its highest year-to-date volume, owing to large and fast fiscal and monetary stimulus by central banks.

• However, a bulk part of this total was local bond issuance by Chinese firms, reflecting the extraordinary support by the government, not only through easier financial conditions but also fiscal support through special project bonds.

• Most of these special project bonds were issued in March and April, at the height of the COVID-19 disruptions, as well as July and August’s “stimulus” during recovery phase.

Through August, 2020 issuance exceeds $1.3 trillion

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Asia-Pacific Cumulative Corporate (Financial and NonFinancial) New Bond Issuance

2016 2017 2018 2019 2020($ Bil.)

YTD

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Asia-Pacific Corporate (Financial and NonFinancial) New Bond Issuance

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Data as of Aug. 31, 2020. Source: S&P Ratings Research; Thomson Reuters.

YTD



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APAC Corporate Issuance| By Market

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Data as of Aug. 31, 2020. Source: S&P Global Ratings Research; Thomson Reuters.

(Bil. USD)

• In contrast to local bond issuance, foreign bond issuance by Asia Pacific firms has only recently recovered, bringing it back to about the same pace as 2019.

• Very low levels of activity in April offset the strong start to the year, after which issuance activity recovered to the 2018-2019 average pace.

• Geographically, the recovery has been uneven. China continues to account for most offshore borrowing in the region, followed by the larger developed markets. There has been much thinner activity from Emerging Asian entities.

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Ratings Trends and OutlooksSummary



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APAC Upgrade and Downgrade Potential Compared With Historical Averages | By Sector

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• While compared with the sector historical averages, Media & Entertainment (including lodging companies) and Automotive sectors show the most current downside risk; upgrade potential led by healthcare.



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Downgrade Potential | Regional Negative Bias

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– Tiger EconomiesAnd Other Developed Asia: Downgrade potential remains elevated when compared with both five-year and 10-year averages due to the pandemic and the ongoing global economic recession.

– Rest of APAC:Downgrade potential remained high as of end of August, above both historical averages.

Data as of Aug. 31, 2020 and exclude sovereign. Source : S&P Global Ratings Research. Tiger Economies includes Singapore, South Korea, Taiwan and Hong Kong. Other developed includes Australia, New Zealand, and Japan.

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Developed APAC Tiger Economies Emerging APAC

APAC Downgrade Potential Differentiated Across Region

10-Year Average 5-Year Average 31-Aug-20



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Regional Bias Outlooks| By Country (Or SAR)

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SAR – Special Administrative Region. Data as of Aug. 24, 2020. Note: Numbers in parentheses refer to the number of entities included in the calculation; Excludes developing outlook; Includes Financial & Non-Financial Companies. Parents only. Source: S&P Ratings Research.

• Asia-Pacific negative bias is led by Malaysia, while positive bias is led by Singapore (despite small sample size)

(Total Issuer Counts)



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APAC Ratings Distribution | By Sector

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Data as of September 10, 2020. Source: S&P Global Ratings.

• The vast majority of rated issuers in APAC are investment-grade. Transportation continues to have the highest share of speculative-grade, at 7 out of 11 rated companies, followed by metals & mining (11 of 22), health care (2 of 4), and building materials (3 of 6). Real estate has the highest number of speculative-grade issuers, at 21 out of 61 rated companies.

(Number Of Issuers) 0 20 40 60 80 100 120 140 160

AutomotiveCapital Goods

Chemicals, Packaging & Environmental ServicesConsumer Products

DiversifiedFinancials (ex. Insurance)

Forest Products & Building MaterialsHealth Care

High TechnologyHomebuilders/Real Estate Co.

InsuranceMedia & EntertainmentMetals, Mining & Steel

Oil & GasRetail/Restaurants

TelecommunicationsTransportation

Utility

APAC Corporates (Financial and NonFinancial) Ratings Distribution

AAA AA A BBB BB B CCC & Below



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APAC Ratings Distribution | Non-Financial Ratings Distribution and Outlooks

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Data as of September 20, 2020. Source: S&P Global Ratings

Riskiest issuers

• Roughly 41% of the APAC non-financial corporate spec-grade universe remains vulnerable to credit deterioration (i.e. spec-grade with negative outlook/CW negative). This is down from 44% in June. More importantly, the share of CW negative placements within this segment has fallen to 8% from 21% in June, suggesting less imminent risks of downgrades in the short term.

• Meanwhile, 52% of speculative-grade credits carry a stable rating, up from 47% last quarter.

• Within non-financial corporates, the majority of those poised for deterioration are in real estate and utilities (15 each), autos (13) and media/entertainment incl. lodging/leisure (9). Majority of these are on negative outlook as opposed to CW negative placements.

• Among the eight riskiest issuers (B- and below), there are no CW negative placements (compared to 2 of 9 in June).

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Chemicals, Packaging &…Consumer Products

DiversifiedFinancials (ex. Insurance)

Forest Products & Building MaterialsHealth Care

High TechnologyHomebuilders/Real Estate Co.

InsuranceMedia & EntertainmentMetals, Mining & Steel

Oil & GasRetail/Restaurants

TelecommunicationsTransportation

Utility

Non-financial Corporates Ratings Outlooks Across Rating Category

CW Neg Negative Outlook Stable Positve Outlook/CW Pos



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APAC Fallen Angels / Potential Fallen Angels

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Data as of Aug. 31, 2020. Source: S&P Global Ratings

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Potential Fallen Angels Approach “Taper Tantrum” Levels, Though Slowing

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• Two fallen angels in 2020 (China (July) and India (June) based); 13 potential fallen angels (through Aug. 31) in the region, almost the highest since the taper tantrum, affecting roughly half the amount of debt during that period.

• Eight of the 13 are in the automotive, homebuilder and real estate companies, or utilities sectors. In terms of affected debt, automotive are at the top (Japan –based Nissan Motor Co. Ltd. And China – based Zhejiang Geely Holding Group Co. Ltd.), followed by a single telco in India.



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Ratings Actions and Defaults Summary



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Global Rating Actions

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Data as of Aug. 31, 2020. Source: S&P Global Ratings.

• With a lower ratings profile at the start of the current crisis, downgrade tallies are rapidly approaching levels seen during the Great Financial Crisis. Despite relatively fewer ratings actions compared to the rest of the world, APAC has seen triple the number of actions for 2020 YTD year-on-year, predominantly downgrades.

• Downgrades account for the vast majority of rating actions across geographies, with downgrade ratios exceeding other periods of stress.

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Global Downgrade RatioDowngrade Tallies By Region



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APAC Ratings Summary| Sovereign In August

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Note: Foreign currency ratings. NM indicates not meaningful. Red means speculative-grade rating, and blue means investment-grade rating. Data as of Aug. 31, 2020. Source: S&P Global Ratings Research. S&P Capital IQ. CDS Spread is as of Aug. 31, 2020.

Country Rating Outlook 5 Year CDS Spread Median Rating Financials (OLCW) Median Rating Non - Financials(OLCW)Australia AAA Negative 15A- BBBBangladesh BB- Stable NM B+

China A+ Stable 37A BBB

Cook Islands B+ Positive NM

Fiji BB- Negative NMHong Kong AA+ Stable 43A A

India BBB- Stable 82 BBB-

Indonesia BBB Negative 93 B+

Japan A+ Stable 17A+ A-Korea AA Stable NM A BBB+

Malaysia A- Negative 46 BBB+

Mongolia B Stable 409

New Zealand AA Positive 16A+ BBB

Pakistan B- Stable 458 B-Papua New Guinea B- Stable NM

Philippines BBB+ Stable 46 BBB

Singapore AAA Stable NM A- BBB+

Sri Lanka B- Stable 805 B-Taiwan AA- Stable NM A- BBB+

Thailand BBB+ Stable 38A- BBB+

Vietnam BB Stable 117 BB-



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APAC | COVID-19 / Oil-Related Rating Actions

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Note: Data includes Sovereign. Data from Feb. 3, 2020 to Aug. 31, 2020. Greater China includes mainland China, Taiwan, Macao and Hong Kong. Source: S&P Global Ratings.

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COVID - 19/Oil Price Rating Actions By Country

Downgrade Downgrade + CW Change OL Change CreditWatch Negative

(Number Of Issuers)



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APAC | COVID-19 / Oil-Related Rating Actions

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Sector Breakdown Of Corporate And Sovereign Debt Amount Impacted By COVID-19 & Oil Price-Related Actions

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Consumer products (3)Technology (6)

Retailing (7)Metals and mining (6)

Business and consumer services (3)Hotels and gaming (6)

Transportation infra (8)NBFI (13)

Media and entertainment (4)Utilities (6)

Health care (2)Insurance (17)

Capital goods (12)Real estate (22)

Chemicals (6)Transportation (17)

Energy (12)Building materials (2)

Automotive (21)Sovereign (8)

Banks (42)

($ Bil)Downgrade + CreditWatch Downgrade CreditWatch Negative OL Change

(Number Of Issuers)



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APAC| COVID-19 / Oil-Related Rating Actions

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Ratings Action| Weakest Links and Default Rates

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Data as of Aug. 31, 2020 and default rates as of July 31, 2020. TE – Tiger Economies. OD – Other Developed. Tiger Economies includes Singapore, South Korea, Taiwan and Hong Kong. Other developed includes Australia, New Zealand, and Japan. Source: S&P Global Ratings Research.

APAC weakest links rose and remain near record highs, indicating higher likely default rates for the region

Default rate continues to rise for APAC, highest monthly default rate seen since 2017

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APAC, 5.49

Developed APAC, 11.43

Tiger Economies, 1.85

Emerging APAC, 5.42

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APAC Corporate | Defaults

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Data as of Aug. 31, 2020. Default data as of July 31, 2020. Source: S&P Global Ratings

APAC corporate defaults so far in 2020 ( YTD 12 Defaulters)

APAC default rate rises to 5.49% by end of July 2020

Date Parent Company Country Sub sector To From Reason1/14/2020 Qinghai Provincial Investment Group Co. Ltd. China Metals, mining, and steel D CCC- Missed interest payments2/21/2020 Tunghsu Group Co. Ltd., China High technology SD CCC- Missed principal and interest payments3/12/2020 Confidential Confidential Metals, mining, and steel SD CCC- Confidential3/19/2020 Geo Energy Resources Ltd. Singapore Metals, mining, and steel SD B- Distressed exchange4/6/2020 FE Investments Ltd. (FE Investments Group Limited) New Zealand Finance companies D CCC Missed interest payments4/7/2020 Speedcast International Ltd. Australia Telecommunications D CCC Missed principal and interest payments4/30/2020 Virgin Australia Holdings Ltd. Australia Transportation D CC Chapter 155/11/2020 Yihua Enterprise (Group) Co. Ltd. China Consumer products SD CCC Missed interest payments6/23/2020 Boart Longyear Limited Australia Metals, Mining & Steel SD CC Missed interest payments7/7/2020 Confidential China Homebuilders/Real Estate Co. D CC Confidential7/8/2020 PT Modernland Realty Tbk. Indonesia Homebuilders/Real Estate Co. SD CCC- Missed principal payments7/17/2020 Seadrill Partners LLC (Seadrill Ltd.) Marshall Islands Oil & Gas Exploration & Production SD CCC Missed interest payments

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IssuanceAdditional Details



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APAC Issuance| Sovereign Debt

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YTD data as of Aug. 31, 2020; includes local / foreign currencies. Source: S&P Global Ratings Research.

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APAC Issuance| Sovereign Top 20 Deals In 2020 By Debt Amount

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YTD data as of Aug. 31, 2020; includes local / foreign currencies. Red means speculative-grade rating, blue means investment-grade rating, and grey means NR (not rated). Source: S&P Global Ratings Research.

Issue Date Issuer Country Market Place S&P Issue-RatingS&P Sovereign Rating (as of Aug. 31, 2020) Security Description Currency

Issuance (US $ Mil.)

26-Feb-20Peoples Republic of China China China Public NR A+ 2.240% Senior Bonds due '23 CNY 6124

10-Mar-20Peoples Republic of China China China Public NR A+ 3.390% Fxd/Straight Bd due '50 CNY 5320

20-Feb-20Chongqing Municipal Government China China Public NR A+ 3.680% Fxd/Straight Bd due '50 CNY 3179

11-Feb-20Peoples Republic of China China China Public NR A+ 2.200% Fxd/Straight Bd due '22 CNY 3015

6-Jan-20Peoples Republic of China China China Public NR A+ 2.250% Senior Bonds due '21 CNY 3011

19-Feb-20 Gov of Xingjiang Uygur China China Public NR A+ 3.760% Senior Bonds due '50 CNY 2115

12-Mar-20 Gov of Xingjiang Uygur China China Public NR A+ 3.440% Fxd/Straight Bd due '40 CNY 1460

18-Mar-20People's Government of Jilin P China China Public NR A+ 3.580% Senior Bonds due '50 CNY 1419

20-Feb-20Chongqing Municipal Government China China Public NR A+ 3.680% Fxd/Straight Bd due '50 CNY 1396


7-Jan-20 Indonesia Republic Indonesia U.S. Public BBB BBB 2.850% Global Notes due '30 USD 1200

7-Jan-20 Indonesia Republic Indonesia U.S. Public BBB BBB 0.900% Global Notes due '27 EUR 1111

14-Feb-20People's Government of Shanxi China China Public NR A+ 3.460% Fxd/Straight Bd due '40 CNY 1045


16-Jan-20People's Government of Shanxi China China Public NR A+ 3.620% Fxd/Straight Bd due '35 CNY 939

2-Jan-20 Gov of Xingjiang Uygur China China Public NR A+ 3.760% Senior Bonds due '40 CNY 862

7-Jan-20 Indonesia Republic Indonesia U.S. Public BBB BBB 3.500% Global Notes due '50 USD 800

21-Feb-20Inner Mongolia Autonomous Reg China China Public NR A+ 2.880% Fxd/Straight Bd due '25 CNY 740





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APAC Issuance| Financial and Non-Financial Top 20 Deals

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YTD data as of Aug. 31, 2020; excludes Sovereign. Red means speculative-grade rating , blue means investment-grade rating, and grey means NR (not rated). Table is for foreign currency only without perpetuals. Source: S&P Global Ratings Research.

Issue Date Maturity Date Issuer Country Sector Market Place S&P Issue - Rating Security Description CurrencyIssuance (US $ Mil)

14-Apr-20 21-Apr-50 Petronas Capital Ltd MalaysiaFinancial Institution U.S. Private NR

4.550% Gtd Mdm-Trm Nts due '50 US 2750

18-Feb-20 25-Feb-25Mitsubishi UFJ Finl Grp Inc Japan Banks U.S. Public A-

2.193% Global Notes due '25 US 2600

8-Jul-20 15-Jul-25Japan Bk for Intl Cooperation Japan Banks U.S. Public A+

0.625% Gtd Global Nts due '25 US 2497

29-Jun-20 31-Mar-30Takeda Pharmaceutical Co Ltd Japan Healthcare U.S. Public BBB+

2.050% Sr Unsecurd Nts due '30 US 2495

27-May-20 3-Jun-30 Tencent Holdings Ltd ChinaHigh Technology U.S. Private A+

2.390% Medium-Term Nts due '30 US 2249

16-Jan-20 23-Jan-23Japan Bk for Intl Cooperation Japan Banks U.S. Public A+


14-Apr-20 21-Apr-30 Petronas Capital Ltd MalaysiaFinancial Institution U.S. Private NR

3.500% Gtd Mdm-Trm Nts due '30 US 2222

21-Jan-20 24-Oct-23 Scenery Journey Ltd ChinaFinance Company Euro Public B

12.000% Gtd Sr Notes due '23 US 2000

21-Jan-20 24-Oct-22 Scenery Journey Ltd ChinaFinance Company Euro Public B

11.500% Gtd Sr Notes due '22 US 2000

29-Jun-20 9-Jul-50Takeda Pharmaceutical Co Ltd Japan Healthcare U.S. Public BBB+


27-May-20 3-Jun-50 Tencent Holdings Ltd ChinaHigh Technology U.S. Private A+

3.240% Medium-Term Nts due '50 US 1999

13-May-20 22-May-23Japan Bk for Intl Cooperation Japan Banks U.S. Public A+

0.625% Gtd Global Nts due '23 US 1997

17-Jun-20 24-Jun-30China Construction Bank Corp China Banks Euro Public BBB+ Sub Cap Notes due '30 US 1996

13-Jul-20 17-Jul-25Mitsubishi UFJ Finl Grp Inc Japan Banks U.S. Public A-


9-Jan-20 16-Jan-25 Westpac Banking Corp Australia Banks U.S. Private NR2.000% Sr Secured Nts due '25 US 1747

29-Jun-20 8-Jul-25Sumitomo Mitsui Finl Grp Inc Japan Banks U.S. Private A-


29-Jun-20 9-Jul-40Takeda Pharmaceutical Co Ltd Japan Healthcare U.S. Public BBB+


6-Jul-20 16-Jul-25 Nomura Holdings Inc Japan Broker U.S. Public BBB+1.851% Global Notes due '25 US 1500

9-Jan-20 16-Jan-25 Nomura Holdings Inc Japan Broker U.S. Public BBB+2.648% Fxd/Straight Bd due '25 US 1500

29-Jun-20 8-Jul-30Sumitomo Mitsui Finl Grp Inc Japan Banks U.S. Private A-




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APAC Debt MaturitiesAdditional Details



Data color order:



APAC| $1 Trillion In Corporate Debt Matures Through 2025

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– Strong issuance in the first half of 2020 has contributed to a increase in the amount of APAC corporate debt maturing through 2025.

– Maturities peak in 2022, when $261 billion is scheduled to mature.

– Almost 97% are bonds through 2025, of which 92% are investment grade bonds in APAC.

Note: Includes bonds, loans, and revolving credit facilities that are rated by S&P Global Ratings on the respective report date. Source: S&P Global Ratings Research.

APAC Maturity Wall – Financial And Nonfinancial Corporates

0

50

100

150

200

250

300

2020.2H 2021 2022 2023 2024 2025

(Bil. $) As of 7/1/2019 As of 1/1/2020 As of 7/1/2020



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APAC Debt Maturing Through 2025 | By Rating Category

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Note: Data as of July 1, 2020. Includes bonds, loans, and revolving credit facilities that are rated by S&P Global Ratings. Source: S&P Global Ratings Research.

Nonfinancial Corporate Maturities By Rating Category Financial Corporate Maturities By Rating Category

0

20

40

60

80

100

120

140

2020.2H 2021 2022 2023 2024 2025

(Bil. $)AAA AA A BBB BB B CCC and lower

0

20

40

60

80

100

120

140

160

2020.2H 2021 2022 2023 2024 2025

(Bil. $)AAA AA A BBB BB B CCC and lower

– ‘A’ category debt maturities through 2025 are highest with $212 billion in APAC non financial corporates.

– ‘A’ category debt maturities through 2025 are highest with $271 billion in APAC financial corporates.

– Compared with nonfinancials, financial services have a greater proportion of highly rated debt.



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Related Research

– COVID-19- And Oil Price-Related Public Rating Actions On Corporations, Sovereigns, And Project Finance To Date, Sep. 29, 2020

– Credit Conditions Asia-Pacific: Recovery Roads Diverging, Sep. 28, 2020

– 'BBB' Pulse: Potential Fallen Angels Remain Stable In August, With Five Outlook Revisions To Stable And Just One Downgrade , Sep. 28, 2020

– Oil And Gas Defaults Continue To Climb, Sep. 25, 2020

– Emerging Markets Face Uneven Recoveries After Economies Hit Low Points In The Second Quarter, Sep. 9, 2020

– The Still-High Weakest Links Tally Contracts As Defaults Rise, Aug. 18, 2020

– Global Refinancing--Rated Corporate Debt Due Through 2025 Nears $12 Trillion, July 27, 2020

– Global Financing Conditions: Bond Issuance Is Expected To Finish 2020 Up 6% After A Strong Second Quarter, July 27, 2020

– Global Corporate Debt Market: State Of Play In 2020, June 25, 2020

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Asia-Pacific Credit Markets Update –3Q 2020U.S. Credit Composite Spreads Trends (bps) 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2016 2016 20162016 2016 20172017 2017