20160623-穆迪服务-WEEKLY_MARKET_OUTLOOK_High_Shareholder_Compensation_Menaces_Credit_27页_643kb

Moody's Weekly Market Outlook Summary

Core Content

Moody's Weekly Market Outlook focuses on the risks to corporate credit from high shareholder compensation and the current state of the credit market. The report includes insights from various contributors and provides forecasts for key economic indicators in the US, Europe, and Asia-Pacific.

Main Points

1. High Shareholder Compensation Ratio

• Definition: The ratio of net equity buybacks plus net dividends to pretax profits from current production.
• Current Status: In Q1-2016, this ratio reached approximately 96%, the highest since 2007.
• Historical Context:
  • During previous recoveries, the ratio was around 67% on average.
  • A ratio above 85% often signals the late stage of a business cycle or the onset of a recession.
• Impact on Credit: A high ratio reduces the earnings that support corporate credit quality and limits the potential for narrowing high-yield bond spreads.
• Correlation: The ratio has a meaningful correlation (0.71) with the high-yield bond spread of one year later.

2. Corporate Downgrade Warnings

• Trend: Negative rating watch actions have eased from their first-quarter peak.
• Current Status: In Q2-2016, downgrade reviews are projected to total 24, a five-year low.
• Upgrade Reviews: Upgrades are increasing, with 25 projected for Q2-2016, which would be the third time in the current recovery that upgrades exceed downgrades.
• Sector Outlooks:
  • 13 out of 50+ global nonfinancial sectors have negative outlooks.
  • The only non-commodity sector with a negative outlook is US newspapers & magazines.
  • The energy and basic industry sectors have the highest spreads (766 bp and 647 bp respectively), indicating a higher risk of default.

3. M&A Activity and Credit Impact

• M&A Trends: M&A activity has been a significant driver of upgrade reviews, contributing to at least 50% of all upgrades for nine consecutive quarters.
• Current Status: M&A activity in the US has declined from a record high in Q1-2016, with a moving yearlong sum of $3.171 trillion.
• Credit Impact: While M&A boosts credit quality, its impact is limited in the broader market. This year is expected to see only $53 billion in bonds linked to upgrade reviews, the lowest in over 16 years.

4. Distressed Bonds and Default Projections

• Distressed Bonds: The count of distressed bonds (spreads > 1,000 bp) has dropped significantly from its peak in Q1-2016 (1,180) to 625.
• Default Rate: Moody's forecasts the US high-yield default rate to rise from 5.0% in May to a seven-year high of 6.5% early next year.
• Market Conditions: Despite the drop in distressed bonds, the default rate remains elevated due to ongoing sectoral stress and limited recovery in corporate profits.

5. Economic Outlook for the Week Ahead

US

• Durable Goods Orders – May: Forecast at -0.5% overall, 0.1% ex-transportation. Expect a third consecutive increase in core orders.
• University of Michigan Consumer Sentiment – June Final: Forecast at 94.1. Inflation expectations are a key focus.
• GDP – First Quarter (Third Estimate): Forecast at 1.0%. Economic growth is expected to accelerate alongside retail sales rebound.
• S&P / Case-Shiller Home Price Index – April: Forecast at 5.5% yearly change. Mortgage rates are expected to support housing affordability.
• Conference Board Consumer Confidence – June: Forecast at 93.1. Confidence is rising but still lags this year's highs.
• Personal Income & Spending – May: Forecast at 0.3% income, 0.4% spending. Income growth is expected to support spending and wealth accumulation.
• Pending Home Sales Index – May: Forecast at -2.0%. Despite the decline, housing demand remains strong.
• ISM Manufacturing Index – June: Forecast at 51.0. Positive signals for industrial demand.
• Construction Spending – May: Forecast at 0.7%. Residential investment is expected to support construction spending.
• Vehicle Sales – June: Forecast at 17.3 million. Auto sales growth is slowing.

Europe

• France GDP (1st Quarter): Expected to grow 0.6% q/q, with a 1.3% y/y growth. Fixed investment and consumption are likely to rise.
• Italy Retail Sales (April): Continued decline at 0.6%.
• Labor Market: Employment and participation are increasing, while the savings rate remains high.
• European Soccer Championship: Expected to boost GDP growth in the months ahead.

Key Information

• The high shareholder compensation ratio is a key indicator of financial stress and potential credit risk.
• The credit market is showing signs of moderation, with a decline in downgrade warnings and an increase in upgrade reviews.
• M&A activity has been a significant factor in recent upgrades but is not a major driver of the broader credit market.
• The US high-yield default rate is expected to rise, though likely to remain below recession levels.
• Economic indicators for the US and Europe suggest a cautiously optimistic outlook, with some signs of recovery and others indicating continued challenges.