Local SOEs in ratings boost
By Richard Fu |
July 20, 2012, Friday
|
Print Edition
Print Edition
THERE is potential China's local state-owned enterprises will be rated higher as they are likely to receive extraordinary government support, according to ratings agency Moody's.
"China's local SOEs enjoy benefits such as ongoing operational support from local governments as well as better access to bank financing and domestic capital markets that help enhance their credit quality," said Ping Luo, a Moody's vice president and senior analyst.
She co-authored a new report that addresses investors' queries about the agency's approach to local SOEs. An increasing number of these entities issue offshore bonds.
Moody's will consider boosting a rating if it concludes the relevant local government has the willingness and ability to provide extraordinary support, Luo said.
A key driver for the government's willingness to provide support is the extent to which some industries are important to their local economies. Therefore, the probability of extraordinary government support for strategically important local SOEs in times of stress is higher, Moody's said.
Ivan Chung, a Moody's vice president and senior analyst, and also a co-author of the report, said: "Increasing the rating of any local state-owned enterprise will be considered on a case-by-case basis since local governments differ in terms of their ability to provide support, given the varying strengths of their economies."
"China's local SOEs enjoy benefits such as ongoing operational support from local governments as well as better access to bank financing and domestic capital markets that help enhance their credit quality," said Ping Luo, a Moody's vice president and senior analyst.
She co-authored a new report that addresses investors' queries about the agency's approach to local SOEs. An increasing number of these entities issue offshore bonds.
Moody's will consider boosting a rating if it concludes the relevant local government has the willingness and ability to provide extraordinary support, Luo said.
A key driver for the government's willingness to provide support is the extent to which some industries are important to their local economies. Therefore, the probability of extraordinary government support for strategically important local SOEs in times of stress is higher, Moody's said.
Ivan Chung, a Moody's vice president and senior analyst, and also a co-author of the report, said: "Increasing the rating of any local state-owned enterprise will be considered on a case-by-case basis since local governments differ in terms of their ability to provide support, given the varying strengths of their economies."
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