For most of the world’s bond insurers, a junk credit rating would be a devastating blow. Selling promises to pay someone else’s debt is a whole lot harder when your own financial strength is in doubt.
Unless, that is, you’re in China.
As the country’s bond insurance industry grows at a record pace, not even a cut to junk by Moody’s Investors Service has been able to stop the expansion of China United SME Guarantee Corp, a top-five debt insurer whose shareholders include JPMorgan Chase & Co and Siemens AG. United SME says the April 7 downgrade had virtually no impact on its onshore business, which surged by as much as 40% in the first quarter.
Such breakneck growth at a time of spreading corporate defaults is fueling concern that China’s debt insurers will struggle to make good on their guarantees in the nation’s US$3 trillion domestic corporate bond market. As the only player in China covered by Moody’s, United SME offers a rare glimpse into a lightly-regulated industry that the ratings firm predicts could face payment difficulties -- and even some bankruptcies -- as China’s credit cycle turns.
“I’m definitely worried,” said James Yip, a Hong Kong-based money manager at Shenwan Hongyuan Asset Management (Asia) Ltd, which has pared holdings of insured bonds in China and expects yield spreads on the debt to widen. “The kind of reassurance the guarantee companies could offer has waned.”
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Unless, that is, you’re in China.
As the country’s bond insurance industry grows at a record pace, not even a cut to junk by Moody’s Investors Service has been able to stop the expansion of China United SME Guarantee Corp, a top-five debt insurer whose shareholders include JPMorgan Chase & Co and Siemens AG. United SME says the April 7 downgrade had virtually no impact on its onshore business, which surged by as much as 40% in the first quarter.
Such breakneck growth at a time of spreading corporate defaults is fueling concern that China’s debt insurers will struggle to make good on their guarantees in the nation’s US$3 trillion domestic corporate bond market. As the only player in China covered by Moody’s, United SME offers a rare glimpse into a lightly-regulated industry that the ratings firm predicts could face payment difficulties -- and even some bankruptcies -- as China’s credit cycle turns.
“I’m definitely worried,” said James Yip, a Hong Kong-based money manager at Shenwan Hongyuan Asset Management (Asia) Ltd, which has pared holdings of insured bonds in China and expects yield spreads on the debt to widen. “The kind of reassurance the guarantee companies could offer has waned.”
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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