Mainland agency aims to boost its global rating

PUBLISHED : Wednesday, 01 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:47pm


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A mainland credit ratings agency wants to break into the global market by rating yuan-denominated bond issuers in Hong Kong.

China Chengxin (Asia Pacific) Credit Ratings Company is seeking to break the stranglehold of Moody's, Fitch Ratings and Standard & Poor's, which together claim 90 per cent of the global credit ratings business. But the mainland agency - the first in Hong Kong - says it needs a 'cut-in point' in order to establish an international reputation.

'We expected the year-on-year growth of dim sum bonds [yuandenominated and issued in Hong Kong] to slow in the second half of this year,' Chengxin managing director Philip Li said. 'It would still be a big jump from 2009. There will be fluctuations in time but [growth in dim sum bonds] is already a trend that can't be turned around.'

The amount raised from dim sum bonds tripled to 107.9 billion yuan (HK$132.29 billion) last year from 35.8 billion yuan the previous year.

In the first five months, growth slowed from a year ago, but Li said the market was still huge and he expected the total issue amount this year to be worth at least 80 billion yuan.

Chengxin is not wholly mainland-owned. Its holding firm, China Chengxin Credit Management, formed a joint venture with Fitch Ratings in 1999. Seven years later it brought in Moody's as an investor, which still holds a 49 per cent stake.

But Mao Zhenhua, founder and chairman of the Chengxin Group, said the joint venture only rated mainland companies, banks and institutes, while China Chengxin (Asia-Pacific) was a separate operation rating debt and other products issued in Hong Kong.

'Even if the JV put out ratings for bonds issued in Hong Kong, they would not be recognised by the global regulators. We conduct our own ratings,' Mao said.

Agnes Wu, a veteran financial analyst, said a reliable credit rating agency was exactly what local investors needed at a time when dim sum bonds were booming. 'In the past, you needed at least HK$50 million to be able to invest in corporate bonds, but now even small investors with a few tens of thousands of dollars can join the game,' Wu said. 'But with more corporates issuing bonds these days, how many of these investors really understand the risks?'

Mao said local regulators should make obtaining credit ratings compulsory for bond issuers, as was the practice on the mainland and elsewhere. He said Chengxin's familiarity with mainland policies gave it an edge over its international rivals.

107b yuan

The amount raised from dim sum bonds tripled last year from 2010 to this much, in yuan