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Class Editori News

S&P issues its first credit rating in China

July 12, 2019


Abstract : Standard & Poor's is the first international credit rating agency to give an opinion on a bond issued on the Chinese market.

MILAN, Jul 11 (Class Editori) -- Standard & Poor's is the first international credit rating agency to give an opinion on a bond issued on the Chinese market. S&P, through a local subsidiary, assigned a triple A with a stable outlook to Icbc Financial Leasing, a subsidiary of Industrial & Construction Bank of China, the world's first asset bank, specialized in leasing for the aeronautics and naval sector and which recently financed also MOBY and Msc. The judgment, writes the agency, “reflects the strong ability of the company to meet financial commitments.” Possible liquidity risks linked to the debt can be fully managed thanks to the support of the parent company.

However, regardless of the rating assigned, the judgment represents a milestone in the opening process and for greater transparency of the Chinese financial market. The Chinese bond market in 2019 can become the second in the world. However, Chinese agencies are often accused of giving favorable opinions to local issuers, underestimating the risks. The same Dagong, the best known of the Chinese agencies which has ramifications also in Europe, ran into sanctions. Last August, in fact, the National Association of Institutional Investors on the Financial Market (Nafmii), a supervisory body of the debt market led by the central bank, had suspended part of the agency's activities for violating the regulations, because it seems that it had provided direct consultancy services to the same companies subject to the rating and given false information during a survey conducted by the same association.

“We are committed to improving our presence in China. The success of the assignment of our first rating on the local bond market is a crucial step,” commented Douglas Peterson, president and CEO of S&P Global. “Since we obtained the authorization we have been galvanized by the interest of the issuers, of the investors and the market in general.”

S&P will now have to build confidence in Chinese investors. The agency led the way by receiving permission to enter the local market last January. The other two big sisters will follow. Fitch has already created its own Chinese entity, while Moody's has applied for a license.

The CEO of Eurizon SlJ Capital believes that the opening of the Chinese bond market represents the most critical change in global finance since the introduction of the euro in 1999. “During the late 40 years, since the opening of China, liberalization has mainly affected the real economy, including trade and foreign direct investment, but excluding the financial sector.”

Stephen Li Jen added that, over the past two years, the world has witnessed market opening policies that encouraged foreign investors to enter the stock and bond markets. “We believe that in the medium term there will be significant prospects of capital flows, in the amount of 2,000 billion dollars in three years.”

(Source:Class Editori)

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