Increased demand for unrated bonds to negatively impact ratings agencies
Investors are increasingly able to identify bond offerings by strong and stable corporations and therefore do not need ratings agencies to aid in their decision-making process. July 11, 2012 | Tiah Wen LiUnrated US-dollar bond sales from some of Hong Kong’s best-known companies have reached a record high, with nearly a third of all listed company bonds launched in the first half of 2012 having not been assigned credit ratings by either Moody’s, Standard & Poor’s and Fitch, a rather surprising trend. More recently, Thailand’s Securities and Exchange Commission allowed accredited investors – individuals, banks, insurance companies, employee benefit plans, and trusts – to invest, with no proportion of investment limit, in unrated bonds as well as non-retail mutual funds that invest in unrated debt instruments. This has contributed to a surge in the debt capital market volumes in the Asia Pacific region, as figures hit a record high of $455 billion in the first six months of 2012 (excluding Japan) – 19% higher for the same period year on year. As financial analysts being debating firms’ need to obtain credit ratings before issuing bonds, the relationship between debt issuers and ratings agencies has hit a rocky patch, with the long-term future of the ratings industry seeming uncertain as traditionally, fees procured from bond issuers has been the industry’s main source of income. Figure 1. Issuance of internationally rated, locally rated and unrated bonds in Asia Pacific (excluding Japan) for Q1 2012
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Categories: China, Credit Risk, Exchanges, Hong Kong, Markets & Exchanges, Risk and RegulationChina,Credit Risk,Exchanges,HK,Markets Exchanges,Risk and Regulation, China,Credit Risk,Exchanges,Hong Kong,Markets & Exchanges,Risk and Regulation, Keywords:Unrated Bonds, Moody’s, Standard & Poor’s, Fitch, Debt Capital Market, HNWI, Sovereign Bonds, Goldman Sachs, Rita Chan Unrated Bonds, Moody’s, Standard & Poor’s, Fitch, Debt Capital Market, HNWI, Sovereign Bonds, Goldman Sachs, Rita Chan
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