Mingpao, one of the primary Hong Kong newspapers, recently reported that rating agency Moody’s has just downgraded the credit ratings of the four major Chinese non-performing asset management companies.
- Huarong’s (HKSE 2799) long-term issuer rating was downgraded by one notch to Ba1, a non-investment grade commonly known as junk level. The rating outlook for Huarong remained negative.
- Moody’s also downgraded Oriental Asset Management by one level to Baa2.
- Cinda (HKSE 1359) fell below A3 and was downgraded by one level to Baa1, the same rating as Huarong. The downgrade reflects continued tension in the Chinese real estate market and slowing economic growth. There is pressure on Cinda’s asset profitability, asset quality and capital position.
- Moody’s also downgraded Great Wall Asset Management’s long-term credit rating by one notch to Baa3, just one notch above junk status. This was mainly due to Great Wall’s continued major deficiencies in corporate governance and pressure on its capital position – they delayed the release of the 2022 annual performance report.
The other two major rating agencies, S&P and Fitch, also downgraded the credit ratings of China’s four major asset management companies in September of last year and January of this year, respectively. According to the Mingpao article, there is a lack of sustainability and transparency in supporting asset management companies that have suffered large losses and capital erosion. Moody’s expects that Chinese officials will prioritize resources to support state-owned enterprises.
Source: Mingpao, January 20, 2024