|
After issuing sovereign credit ratings on 50 countries on July 11, 2010,
today, Dagong Global Credit Rating Co., Ltd. (hereinafter referred to as
“Dagong”) releases once again the credit ratings on 9 countries and regions
including Hong Kong, thus, increasing the number of issued sovereign credit
ratings to 59. The newly issued credit ratings on the 9 countries and regions
are based on the Sovereign Credit Rating Standard created by Dagong, and the
rating grades are assigned after in-depth studies of the special credit risk
formation pattern of each country or region, displaying the integral combination
of the particularity in credit risk formation and the consistency in credit
rating. The rating results of the 9 countries and regions are as follows:
I． Credit Rating Results
The geographical coverage of the 9 countries and regions rated by Dagong this
time is as follows: three European countries-Austria, Sweden, and Latvia; three
Asian regions-Hong Kong, Macao and Taiwan; two African countries- Morocco and
Tunisia; and one South American country-Peru.
In terms of the overall credit
level, among the 9 countries and regions rated, 8 of them are assigned credit
ratings of both local currency and foreign currency above investment grade (BBB-
and above), accounting for 89%, only one country is assigned the speculative
grade (BB+ and below), accounting for 11%. As to the consistency of grade for
local currency and foreign currency, 8 countries and regions are given the same
grade for their local currency and foreign currency; there is no country or
region with local currency rating lower than that of foreign currency; 1 country
is assigned a grade for local currency higher than that for foreign currency.
The rating details are summarized in table 1.
II. Introduction about the Credit Rating Results
To introduce the rating grades of the local currency of the 9 countries and
regions, our discussion centers around the following two respects: firstly we
will compare the credit risk difference of the 9 countries and regions with
different scales; secondly we will compare our results with the credit ratings
given by the three American credit rating agencies, namely Moody’s, Standard
& Poor and Fitch.
(I) A comparative analysis of the 9 countries and regions with
different ratings
1. Countries and regions with AAA local currency rating
Two country and
region, namely Hong Kong and Sweden, are assigned AAA local currency rating.
These two country and region both demonstrate superior comprehensive performance
in the three basic elements of governmental management capability, economic
strength and financial strength; meanwhile, their debt burden is either
extremely low (Hong Kong) or moderate (Sweden), enabling them to maintain fiscal
equilibrium in the medium and long term and to have zero or low demand for
financing. The global financial crisis only inflicts a certain impact to them in
overseas market demand, and their economy is witnessed relatively fast recovery,
showing a perspective of steady growth in future. Considering that they have
outstanding strength in four factors for local currency rating and that there is
no debt redemption risk in the foreseeable future, they are both assigned AAA
rating.
2. Countries and regions with AA local currency rating
There are 3
country and regions, namely Austria, Macao and Taiwan, whose local currencies
are assigned AA grade. Austria and Macao are both assigned AA+ for local
currency rating. Austria has demonstrated sound performance in the three basic
elements. Though the economic strength and financial strength were adversely
affected by the financial crisis, yet they have shown a sign of improvement and
stable outlook of recovery; the protruding problem is constant fiscal deficit.
Economic stimulus and financial bailout exacerbate the already heightened debt
burden, and accordingly weaken the nation’s fiscal strength. Macao has an
extraordinarily strong fiscal strength with zero debt burden, but in recent
years, the over-reliance on gambling industry has reinforced the unicity in
Macao’s economic structure, leaving a deficiency in its economic strength.
Taiwan is rated with AA- grade. Compared with Austria and Macao, the region is
observed more disadvantages: there exists limited room for its fiscal policy
adjustment in response to the rising financial obligation; in addition, the
continuity and predictability of the government policy are not ideal.
Fortunately, Taiwan’s economy has sufficient resilience, which is expected to
promote the growth of its fiscal revenue.
3. Countries with BBB local currency rating
There are 3 countries, namely
Tunisia, Morocco and Peru, whose local currencies are assigned BBB grade, with
all of them rated BBB+. These three countries have shown continuous improvement
on the all the rating elements, to each of which have a relatively stable basic
supporting force without significant short board; however, there is still a long
way to go for the development regarding each element. For example, economic
growth in these three countries is optimistic, but the quality of economic
development remains to be improved, and the unemployment rate is still
relatively high; the financial strength is ameliorating, but the financial
robustness and development level still need to be improved. In the past five
years the three countries have achieved the primary fiscal surplus, while the
considerable historically-accumulated debts are observed decline.
4. The country with BB local currency rating The country assigned BB
local currency rating is Latvia. Latvia overused its liberalization in economy
and finance during the process of economic transformation; and it is so
seriously affected by the global financial crisis so that its economic growth
has not yet resumed by 2010. It has a large size of fiscal deficit. Only through
the help of the relief loan from the European Union and the International
Monetary Fund can Latvia maintain the solvency of its local currency and foreign
currency debts. Latvia is the country that has the largest credit risk among the
countries and regions rated by Dagong this time.
(II) Comparative analysis with the three rating agencies of
Moody’s, S&P and Fitch
Take the credit rating on local currency as an example, there are two
occurrences that Dagong’s rating results are unanimously higher than those of
the three rating agencies. They are Hong Kong and Macao. There is one
occurrence that Dagong’s rating result is unanimously lower than that of the
three rating agencies and it is Austria. There are six occurrences that Dagong’s
rating results are either identical with or between those of the three rating
agencies, and they are Sweden, Taiwan, Peru, Morocco, Tunisia and Latvia. The
rating details are summarized in table 2.
Now a brief analysis is conducted on the three country and regions with the
case of “unanimously higher” or “unanimously lower” situation. After their
return to the People’s Republic of China, Hong Kong and Macao have formed a set
of relatively sound mechanism of operation of local powers through years of
exploration in practice under the framework of the Basic Law, and the
government's management capacity has improved; Hong Kong’s economic
restructuring has been basically completed, the economic strategy with the high
value-added services as its major development orientation takes full account of
its own characteristics in the economic integration with the mainland China,
which enables the economy to have the potential of sustained growth. After its
return, Macao’s reform in its economic structure and system has effectively
stimulated economic vitality, and the economy is growing fast. Hong Kong and
Macao’s finance is stable and prudent, the fiscal reserve is sufficient, and the
government has no or almost no debt burden. The political stability and
optimistic outlook of economic growth in the People’s Republic of China has
provided further assurance to Hong Kong and Macao. Besides, being situated at
the Asian economic cycle at the high growing phase enables them to benefit
continuously. Comparing the two places, we find there is a big difference in the
highest and lowest score of Macao in credit risk scale, which indicates that it
has an obvious difference in rating factors, the overall strength of Macao needs
strengthening, falling short of AAA grade, so its rating is a little lower
than that of Hong Kong.
Because of its many advantages, Austria is assigned a high rating. However,
its financial strength has noticeably decreased; the export destination
structure which relies heavily on the internal market of the Eurozone encumbers
its economic growth. Comprehensively, there emerges a difference between Austria
and the credit level of Dagong’s Sovereignty Credit Rating for an AAA country;
therefore it cannot be rated AAA grade. In terms of the judgment of the credit
risk status of other five countries or regions, Dagong’s ratings are identical
or similar with the three American institutions, so detailed analysis is
dispensed.
Dagong will continue to pay close attention to the credit risk fluctuation of
the 59 countries and regions, which we have already assigned the initial rating,
tracking them promptly, and expanding the rating scope. In this process, we will
make prudent judgment and gradually adjust the credit rating of each country and
region in the spirit of being responsible for the country rated, and strive to
give objective, prompt and accurate judgment to the credit risk status of each
country and region, providing equal services to every entity concerned in the
international and domestic credit relations.
|