Chinese rating agency Dagong Global Credit Rating officially launched its Hong Kong subsidiary last week, after securing a licence from the city’s securities watchdog.
Dagong provides ratings for roughly one-third of onshore renminbi issuance in China and is now qualified to provide rating services in Hong Kong, where demand is booming thanks to the growth of international debt issuance by Chinese firms.
“We see significant pent-up demand from our existing customer base in China for offshore RMB rating services as Asian credit markets start to come of age,” said Guan Jianzhong, chairman of the rating firm.
The company will issue a new rating framework for around 100 industries by the end of this month, Guan told FinanceAsia.
The Hong Kong unit plans to rate debts in all currencies including the US dollar and the euro. But it will specialise in renminbi-denominated bonds, according to Guan. It will also introduce more issuers from Europe and emerging markets such as Africa to Hong Kong’s renminbi bond market, said Guan.
The company has appointed Brian McCullough as chief executive and Jiang Zhao as rating director. Both of them will be based in Hong Kong.
Dagong is the third Chinese rating company to get qualification for Hong Kong’s business, following Shenzhen-based Pengyuan Credit Rating and Beijing-based China Chengxin International, also an onshore affiliate of Moody’s.
The move comes after Dagong triggered controversy when it downgraded the sovereign credit rating of the US twice, in 2010 and 2011, after expressing doubt about Washington's long-term ability to repay its debts in the wake of the financial crisis.
Its first sovereign credit ratings, published in July 2010, ranked China higher than the US and Japan, citing growing deficits in the developed world.
Guan blasted at the oligopoly in the international rating community and blamed the big three agencies — Standard & Poor’s, Moody’s and Fitch — for the 2008 financial crisis.
“It is the flawed ratings assigned by these credit rating agencies that have derailed the development of Wall Street,” said Guan.
Guan aims to provide a competitive methodology and new types of rating principles compared to the big three.
Not everyone is convinced. “I wasn’t buying its claims because the reasons for the downgrades were not clear enough,” said a fund manager with a global company. “I doubt the Chinese rating firm’s objectivity.”
Guan said Dagong will retain its negative outlook on the US and its sovereign rating. “We will not change our view in a considerable time period,” said Guan.
