SHANGHAI: China's interbank bond market regulator has warned of the risk of inflated credit ratings and widespread industry problems following a review, after defaults by highly rated state-owned enterprises triggered market panic.
"(We have) noticed that examples of specific rating institutions' upgrades of issuer ratings are clearly above the industry average, and rating inflation and other potential risks exist," the National Association of Financial Market Institutional Investors (NAFMII) said in a statement dated Nov. 30 and posted on its website on Thursday evening.
The vast majority of Chinese corporate bonds are issued by domestic firms boasting ratings of AA or higher, implying little default risk and giving little guidance on pricing. Investors say recent defaults of AAA-rated state firms has undermined faith in even the nominally safest ratings.
...