2015 is an eventful year for China, for reasons good and bad. The acute reversal in the mainland stock markets over the summer, along with this month’s administered decline in the Yuan (Renminbi) against USD and other currencies, have unsettled many investors whose expectations for China’s performance were very different. Is there cause for alarm among fixed income investors with broad exposure to Chinese corporate credit?
Ashvin Chotai, Stone Mountain Capital's Senior Advisor in Research, wrote in research perspective Vol. 3 on August 6th 2015, that neither sharp gains nor losses in Chinese equities this year were justified by economic or company fundamentals. This observation is readily confirmed by the hard quantitative assessments of financial and operating efficiency that Rapid Ratings International has conducted on 600 mainland Chinese companies over the last 12 months.
Rapid Ratings conducts an in-depth examination of balance sheets and income statements of companies in a country coverage report. Rapid Ratings then publishes a Financial Health Rating or FHR™ on each company on a scale that runs from zero/worst to 100/best. FHRs carry no geographic biases, in contrast to ratings elsewhere. Every month Rapid Ratings collects ratings and rating changes – “deltas” - within each of 34 countries with the largest number of names in coverage, in order to compare financial health trends.
Rapid Ratings will keep its readers thoroughly up-to-date on these comparative metrics as they change in coming months. As of now, FHR readings within China do not show cause for broad-based alarm among corporate bond investors.
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The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, Stone Mountain Capital LTD. Readers should refer to the Disclaimer.