SHANGHAI - By day, Yao Yu heads up risk control for an investment firm in the southern metropolis of Shenzhen. By night, he goes on the prowl for his own business, Ratingdog, sniffing out data that could bring clarity to China’s notoriously opaque bond market.
“In China, for fixed income, we need these kinds of services,” said Shen Yi, chief executive officer of Shanghai ShenYi Investment Co, referring to companies such as Ratingdog. “There’s a lot of space in the market for good information.” Then on Feb. 22, Qinghai Provincial Investment Group , rated AA by three agencies including Dagong Global Credit Rating Co Ltd, became the first state-owned enterprise in decades to miss a deadline for an offshore bond coupon payment.
Jean-Charles Sambor, deputy head of emerging market debt at BNP Paribas Asset Management, said analysis of issuing companies has tended to focus on the likelihood of government support, rather than balance sheets. S&P Global Ratings recently became the first global agency to receive a license to rate Chinese onshore bonds. Fitch Ratings, which has established a domestic entity, and Moody’s Investors Service have also applied for licenses.However, S&P Global will follow an “issuer-pay” model in China, similar to the one that domestic agencies currently use. Many investors in China have been wary of the practice, whereby ratings are given to issuers enlisting the agency’s services.
But Yao plans to press ahead anyway, by introducing investor-paid customised research alongside its free analysis. A senior rating industry source, who follows Ratingdog on WeChat, said that regulatory requirements are “very strict”, including annual audits with on-site checks conducted by regulators.Yao said he is following a “different road” and not seeking a rating license, but how to operate legally is “a long-term consideration.”Ratingdog is not alone in looking to feed the market’s hunger for information.