Moody’s warnings should not be taken in stride.
The agency only issues warnings when they absolutely have to and cannot put off the bad market sentiment any longer.
They can only cover up so long until it becomes obvious. For their own good, they have to look like a serious credit rating agency when the markets tank, so they can say “I told you so.”
China Set for Record Defaults, and Downgrades Tip More Pain
China is zooming to a record year of corporate-bond defaults, with the 2018 total already more than three-quarters of the previous high even before an expected economic slowdown bites.
Chinese companies have reneged on about 16.5 billion yuan ($2.5 billion) of public bond payments so far this year, compared with the high of 20.7 billion yuan seen in all of 2016, according to data compiled by Bloomberg. Strains are set to get worse if the trends of credit-rating companies are anything to go by — agencies including Dagong Global Rating Co. have been downgrading firms by an unprecedented margin.
“Corporate profits have worsened this year and are unlikely to improve against the backdrop of an economic slowdown,”
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In the meantime, rising yields are set to make the refinancing of maturing debt all the tougher for private companies that lack the access to the state-dominated banking system that national behemoths enjoy. With the People’s Bank of China making only limited steps to support credit to private companies, borrowing costs show no sign of dropping.
AC