Steel industry cuts the high-rising area into rating

In the course of the downward adjustment of debts and entities ratings in recent years, there have been a number of features such as the increase in ratings, the occurrence in the middle of the year, the concentration of AA segments, and the overcapacity industries. Given that the next two months will be a period of high rating adjustment, investors are advised to focus on credit risk.

The rating agencies' ratings on bonds include debt rating and subject rating. The rating of the entity also includes the rating outlook. From January 2009 to June 2014, a total of 94 debt rating reductions, 108 subject rating downgrades, and 165 subject rating outlooks were lowered, involving 994 bonds. Taking into account the fact that there was a continuous downward adjustment, was downgraded successively by different rating agencies, and was revised downward again, the number actually lowered was slightly less than the above figure.

Through comparison, it can be seen that the changes in the market of China's credit rating in recent years have the following characteristics: First, the number of ratings downgraded from 2012 to 2014 is much higher than 2009 to 2011; second, the ratings in June and July are lowered. More times than other months. In 2013, 77 of the 127 subject rating downgrades occurred in these two months. Exchanges generally require rating agencies to publish a credit tracking report by June 30th. Therefore, the deadline for the report is also the peak of the rating adjustment during the year. Third, rating migration is concentrated on AA-rated bonds. Of the 108 main rating adjustments, 34 were downgraded from AA to AA-. Of the 94 debt rating downgrades, 33 were downgraded from AA to AA-. Fourth, rating cuts were common in overcapacity and debt ratios. High-level industries include chemical, mechanical equipment, steel, electronics, mining and other industries.

We further studied the relationship between the downward adjustment of ratings and the performance of bond prices. Among the 436 transaction data bonds downgraded by the rating of the entity, the number of price declines in the first 14 days, the first 7 days, the last 7 days, and the 14 days after the downward adjustment are 91, 77, 83, and 97 respectively. The average value of the cumulative increase and decrease was -0.01%, 0.03%, -0.02%, and -0.04%, respectively. Of the 94 bonds with debt ratings down, the number of declines in the 14 days, the first 7 days, the last 7 days and the 14 days after the downward adjustment was 16, 18, 32 and 33, respectively. The average value of the fluctuations was 0.06%, -0.05%, -0.37% and -0.51%. It can be seen that the adjustment of debt rating has a more significant impact on prices; in addition, the relatively consistent performance before and after the rating adjustment of the main body also indicates that the market has a certain expectation for the rating downgrade.

On March 4, 2014, Chaoyue Sun officially announced that it was unable to pay interest in full on the interest payment date on March 7. This incident also means the end of the Chinese-style rigid payment. It is worth noting that although 2014 was known as the "first year of default on bond market," this year's credit spreads did not repeat the scenario of a spike in interest rates during the 2011 urban investment debt crisis. There are two main reasons behind this. First, the credit risk that broke out this year was only transferred into point or online risk, and did not expand to the level of the face. Second, the rating agencies have made relatively frequent adjustments to the debt rating, and the credit spread has changed It is reflected in the rating migration.

From the perspective of changes in the macro economy and the overall credit market, it is expected that the number of individuals whose ratings will be lowered in 2014 will not be less than that in 2013. The next two months will be the high rating period for rating adjustments. The downgrade of ratings may occur in a concentrated manner. It is recommended that investors pay attention to attention. Credit risk, beware of "thundering."