花旗亚太区评级新鲜事年度特刊：回首2021，展望2022 | Citi: APAC Ratings Special Edition: Things to Archive for 2021 and to Watch Out For in 2022

1. 2021 saw SE Asian unicorns getting rated; technology names and consumer names dominate the Asian initial ratings market.?Southeast Asia’s ride-hailing and food delivery company Grab, Indian ride-hailing company Ola, India based hospitality aggregator OYO got single-B range ratings from the international rating agencies. It’s worth mentioning that Ola and OYO used the ratings for term loans issuance – an alternative funding route we expect to continue in 2022 for many more Asian unicorns. China is adding its fair share on technology new ratings but with a concentration on IG categories, including Fintech names such as East Money and Futu (both BBB-), as well as Bain-owned internet data center Chindata (Ba2/BBB- from Moody’s and Fitch respectively). Consumer names such as hot pot restaurant operator Haidilao and Mengniu-backed dairy name China Modern Dairy also joined the IG club. We expect, technology (including FinTech) and consumer & healthcare, to continue to drive the new ratings in 2022. It would be also interesting to watch whether the market would finally warm up to more Chinese non-property high-yield names as the sentiments towards in China property continues to wane.

1.?东南亚的数家独角兽公司在2021年获得评级，科技和消费类企业主导亚洲首次评级市场。东南亚的打车和外卖科技公司Grab、印度的打车科技公司Ola以及印度的酒店整合商OYO获得了国际评级机构的单B档位评级。值得一提的是，Ola和OYO将评级用于定期贷款发行——我们预计2022年会有更多的亚洲独角兽公司选择这种融资途径。中国科技公司在新评级市场上也有所建树，但大多集中在投资级类别，包括金融科技公司，如东方财富和富途（均为BBB-级），以及贝恩资本旗下数据中心公司秦淮数据（穆迪和惠誉评级分别为Ba2和BBB-）；还有一些消费品公司也加入了投资级俱乐部，如火锅店运营商海底捞和蒙牛旗下的畜牧公司现代牧业等。我们预计，科技（包括金融科技）以及消费/医疗保健等行业将继续保持2022年新评级市场主力军的地位。此外，随着中国的“房地产信仰”继续减弱，市场能否接纳更多地产行业以外的中国高收益级公司也值得关注。

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2. China risk:?are we getting near to the end of the tunnel? Agencies have been reviewing Government Related Entities (GRE) support due to the ripple effect from the Huarong credit event, and concluded with systematic cuts of support notches and/or final rating downgrades.?In addition, private sectors such as property and education were hit by fast and severe (oftentimes multiple) downward rating actions: agencies took negative actions on all rated private education names in response to increasing regulatory risks, and more than one-third of rated property entities were in some form of financial problem and got downgraded since then, while some 10 names including Evergrande, averaging a B-range rating one year ago, defaulted in 2021 due to missed coupon/principle payment. 2021 will be marked as the year of the most downgrades for Chinese issuers in recent history.?

In the meantime, there are some green shoots in China too.?S&P changed China’s economic risk trend to positive, which is partly resulting from the property price controls, while Fitch upgraded Chinese banks, securities and leasing companies’ operating environment score to IG. Despite tightening criteria on government support, rating agencies tend to differentiate government-related issuers more clearly. For SOEs deemed very strategically important, they are still comfortable in assigning high support uplifts, such as in Sinochem case post its merger with ChemChina. For 2022, it’s worth watching which sectors Chinese government plans to induce growth from, after its crackdown on multiple private segments.

2.?中国，想说爱你不容易。由于华融信用事件引发的连锁反应，各评级机构开始审查国企政府支持力度，导致政府增信级数减少，甚至最终评级调降。此外，教育、地产等行业私企的降级行动迅雷不及掩耳且时常出现连续多次下调：评级机构鉴于监管风险对所有受评私营教育公司采取负面行动，超过三分之一的受评房地产实体发生不同程度的财务问题并因此被降级，而包括恒大在内的近10家公司则在2021年因未按时支付票息或本金而发生违约，而这些企业一年前的平均评级在单B档位。2021年势必因为中国发行人“壮观”的评级调降而载入历史。

爱之深痛之切的同时，中国企业的评级也不乏可喜的态势。标普鉴于我国楼价调控初见成效，将中国经济风险趋势调整为正面；惠誉将中国银行、证券和租赁公司的经营环境评分上调为投资级。尽管衡量政府支持的标准收紧，但评级机构的政府支持认定呈高度区分化态势：对于被认为具有重要战略意义的国有企业，评级机构仍不吝给与积极的政府支持认定，两化合并后中化评级确认便是一例。展望2022，在多轮对私企的监管行动后，值得关注我国政府将通过哪些行业来实现经济增长。

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3. Methodology updates provide mixed signals: is flexibility in rating methodologies a boon or a bane??This long-debated question has been on agencies’ top officers’ radar for decades. S&P, being the historically most rigid rater, has managed to allow comparability modifiers in standalone analysis through its recent FIG methodology update. Comparatively, Fitch, being the historical most pragmatic rater, is tightening its grip by being more prescriptive in their newly released Parent-Subsidiary Linkage methodology. Across the agencies, analysts are taking extra pain to explain their rating action to issuers given the increasing internal guidances from credit policy and methodology officers, as well as the macro trends driven nature of such actions. In our view, methodology is no more than a tool, and rating is more art than a science. We should always embrace flexibility but not to the extent that issuers can take advantage of loopholes in methodologies without being policed, while we should respect ground rules, but not to the extent that rule makers are playing god.

3.?评级方法论更新风声各异，方法论的灵活性是福是祸？几十年来，该问题一直是各评级机构高层争论的焦点。作为评级方法相对最为程式化的评级机构，标普最近发布的金融机构方法论更新允许在独立分析中考虑可比公司调整；相比之下，作为相对最为灵活的评级机构，惠誉最新公布的母子公司关联性评级方法论对子公司获得支持认定标准则显更加严格。受下行周期影响，评级分析师受内部信用政策和方法论专员“窗口指导”影响更为严重，评级行动的驱动因素愈发宏观化，向发行人解释相关评级行动愈发令分析师头疼。我们认为，评级是门艺术，方法论则是艺术的工具。方法论的灵活性是王道，但不能成为被广泛利用的漏洞导致评级内卷；方法论的一致性是是天理，但也不能让过于书卷气的方法论制约了评级判断。

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4. Amongst the sectors most devastated by the pandemic, transportation, lodging and gaming names in APAC are facing a slower recovery compared with global peers.?Financial performance for these sectors is now not expected to recover to pre-pandemic level until 2H23.?Gaming industry’s growth is driven by international visitors, which are still to see an uptick in numbers. Lodging has been recovering well with KPIs 20-30% below pre pandemic levels, driven by domestic leisure travel demand, but pre pandemic levels aren’t expected until 2023-2024 due to sluggish business travel. Positive trends continue with the airline industry, but zero COVID policy and the competitive landscape in China and India could stem growth. Shipping industry experienced peak earnings in 2021 because high demand for goods overwhelmed supply chains, but earnings are expected to normalize to near 2019 levels with the supply demand gap narrowing and commodity prices stabilizing.

4.?在受疫情影响最严重的行业中，亚太区的交通运输、酒店和博彩公司与全球同业相比恢复速度较缓。这些行业的财务表现预计到2023年下半年才能恢复到疫情前水平。博彩业增长主要依赖国际游客，而游客人数仍未上升。受境内休闲旅行业需求的拉动，酒店业恢复良好，关键业绩指标（KPI）较疫情前水平低20-30%，但由于商务出行不景气，预计直到2023-2024年才能恢复到疫情前水平。航空业则出现积极趋势，但受对疫情的“零容忍”政策以及中国印度等市场激烈竞争的影响，后续增长可能乏力。由于巨大的商品需求令供应链不堪重负，航运业在2021年经历了盈利高峰，但随着供需缺口缩小和商品价格趋于稳定，预计未来盈利将回归到接近2019年的正常水平。

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5. Huarong serves as a classic case to test agencies’ rating signaling system: all rivers run into the sea, however, some rivers are rough, some are smooth.?The state-owned asset management company got international attention since its miss of 2020 results publication in April, when all rating agencies started to consider rating signals. Embarking from different starting lines, i.e. A3 (Moody’s) / BBB+ (S&P) / A (Fitch), all agencies ended up rating the company at BBB at year end. Having said that, both Moody’s and Fitch took a much more drastic approach to get there: we witnessed multiple downgrades within short timeframe from Moody’s and also observed mixed rating signals from Fitch. Comparatively S&P did it neatly – simple moves and clear signaling. Balancing between SOE beliefs and standalone credit profiles, while also trying to stay within the confines of globally comparable rating scales is important, but what is critical in our view, is clear investor signaling.

5.?华融成为检验各机构评级信号系统的经典案例：各行其道，殊途同归。华融在2021年4月份因未能按时发布2020年业绩而引起国际资本市场关注，进而所有评级机构开始考虑发出评级信号。虽然各家评级起点不同——穆迪: A3，标普：BBB+，惠誉：A，但到了年底收官之际所有评级机构的华融评级均为BBB。尽管如此，穆迪和惠誉在此过程采用的方法要激烈得多：穆迪在短期内多次下调评级，而惠誉曾发出前后不一的评级信号。相比之下，标普的做法显得更巧妙：动作简单、信号清晰。虽然在国企信仰与独立信用状况之间取得平衡，同时保持全球可比的评级尺度是评级机构的必由之路，但我们认为最关键的还是向投资者发出清晰的信号。

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6. Agencies added insult to the injured Chinese property developers, market confidence recovery on the sector will take time.?It all started with Evergrande and its floundering liquidity issues but never stopped there. B-rated developers are the most impacted, however, BB-names and even IG names such as Shimao are no longer intact. Negative rumors usually came first, then diminished investor confidence and constrained refinancing channels coupled with pre-existing liquidity pressure are sinking the ship. Agencies were somewhat caught off-guard and mostly playing catch-up to the market, and investors were almost left on their own to react. All three agencies predict 10%-15% slide in property sales in 2022, partly because most investors and home buyers are still in wait-and-see mode. That said, the spillover risks to other sectors are largely contained so far, but the sector's woes also could be a slight downward drag to China’s GDP growth. Developers are exploring alternative funding plans through asset sell-downs and secured financing, to shore up their liquidity position for the next 12 months, as market confidence comeback is not yet around the corner.

6.?评级机构在中国地产开发商的伤口上撒盐，市场对行业的信心恢复尚需时日。一切始于令恒大陷入困境的流动性问题，但并未止于此。受影响最大的是B级开发商，但是BB级公司，甚至世茂这样的投资级公司也无法独善其身。负面传闻率先袭来，其后投资者信心受损和公司再融资渠道受限接踵而至，加之原已存在的流动性压力，最终使巨轮沉没。评级机构则略显猝不及防，大多数情况下是在被动追赶市场，而投资者几乎处于自求多福的状态。三大机构都预测?2022年房地产销售下滑10-15%，部分原因是大多数投资者和购房者仍处于观望态度。尽管如此，对其他行业风险蔓延迄今为止基本可控，但行业困境还可能小幅拖累中国的GDP增长。因为市场信心恢复尚需时日，开发商正在通过资产减持和抵押融资以解燃眉之急。

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7. Digitalization is the absolute future, but the question is who’s going to take the cake.?Asia has observed unprecedented growth in fintech industry, with India and China leading the space, while South-east Asia is gaining momentum as the region’s digital transformation gathers pace. However evolving country specific regulations could pose significant challenge as we have seen for new Chinese Fintech players while protecting some of the industry incumbents. Banking industry, which has a direct business competition from the growing fintech sector, is also rapidly adopting technology to retain its market share, challenging the virtual banks. On the other hand, central banks are swiftly making progress with Central Bank Digital Currencies (‘CBDC’) which is expected to have far-reaching implications to the future of banking, and in Asia-Pacific the implication could vary depending on the region. China is leading from the front, with Australia, Hong Kong, Japan and Singapore not far behind. Up to now the incumbents FIs have not faced rating pressures from the growing competitive threat from Fintech, but this is still something to watch out for in the coming years.

7.?数字化无疑是未来，但问题是谁能占领市场。亚洲金融科技行业出现空前增长，印度和中国暂时领先，而东南亚的数字化转型步伐加快，呈奋起直追之势。然而，正如我们在中国看到的情况，各国的监管法规不断演变，对新出现的金融科技公司构成巨大挑战，同时保护了业内老字号。银行业面临不断发展的金融科技的直接业务竞争，正在迅速采用技术升级来维护其市场份额，应对虚拟银行发出的挑战。另一方面，各国央行正在迅速推进央行数字货币（CBDC），预计这对未来银行业将产生深远影响；而在亚太地区，这种影响或因地域而异。中国在该领域处于领先地位，澳大利亚、中国香港、日本和新加坡紧随其后。到目前为止，老字号金融机构们尚未因受到金融科技威胁而产生评级行动，而这一趋势是否能够持续值得关注。

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8. Listing through SPAC merger has opened doors for rated private companies to improved liquidity and financial flexibility, a key credit positive event.?Use of listing proceeds to reduce debt, significant reduction in financial sponsors’ stakes, signaling a more conservative finance policy and potentially less reliance on debt for future acquisitions are some of the observed rating positives. In such cases the post-transaction capital structure and the immediate reorganization after the transaction closure becomes the pillar of rating reviews. Recently, Grab was upgraded by Moody’s to B2 from B3 following its public listing via merger with Altimeter, a NASDAQ listed SPAC, due to improved liquidity and financial flexibility following its successful listing. And with the new SPAC regime from Hong Kong Exchanges and Clearing Limited (HKEX), which favors new and innovative industries, we believe SPAC listing will be conducive for rated startups to improve their ratings profile.

8.?通过SPAC合并上市为受评非上市公司创造了条件，可以提高流动性和财务灵活性，是重要的信用利好事件。利用上市募集资金减债、大幅减少财务投资者的股权、发出更保守的财务政策信号，以及减少未 来收购案对债务的依赖，显然都是评级利好。在这种情况下，交易后的资本结构和交易结束后即时重组成为评级考量的关键。最近，Grab通过与纳斯达克上市SPAC公司Altimeter合并而实现公开上市之后，穆迪鉴于公司流动性和财务灵活性在上市后有明显改善，将其评级从B3调升至B2。随着港交所推出有利于新兴和创新行业的新SPAC制度，我们认为SPAC合并上市将有利于受评初创公司的评级。

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9. ESG ratings: Green shoots emerge, methodologies are rapidly evolving. It’s not only a market share fight, but a business model combat as well.?We witnessed all agencies updating their ESG methodologies over the year, we saw Fitch’s release of its brand-new ESG Rating under the Sustainable Fitch brand; we also observed Sustainalytics and MSCI becoming more known to the market than ever. Many players are playing all-in, but issuers are still feeling confused. Unsolicited ratings are conducive for market share, but not helpful for client engagement and relationship. Methodology evolution is painful for issuers too – not only is it a moving target, but sometimes unrealistic bars as well. Grievances from issuers about their ESG ratings will push ESG rating agencies to be more transparent on their rating methodologies and also to focus more on issuer communications. Investor-paid rating model dominates, as MSCI champions, but the way forward is uncertain if it doesn’t learn to listen to the issuers.

9. ESG评级：市场飞速发展，方法论迅速演进——这不仅是市场份额之争，也是商业模式之争。过去的一年见证了评级机构ESG评级方法的屡次更新，惠誉高调推出Sustainable Fitch品牌提供全新的ESG评级服务，Sustainalytics和MSCI在市场上如日中天。评级机构一腔热血，但发行人却满脸懵逼。不请自来的评级有利于扩大市场份额，但对于客户互动和客户关系并无益处。方法论的演变也使发行人感到彷徨：不仅标准变得快，而且还时不时有点儿离地。发行人对ESG评级的不满将促使ESG?评级机构提高其评级方法的透明度，并更加关注与发行人沟通。以MSCI为代表的投资者付费评级模式持续占领市场，但如若不重视倾听发行人爸爸的声音，ESG评级的前途并不明朗。

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10. Global ESG reporting standards harmonization is underway, mandatory ESG reporting is coming to APAC.?IFRS Foundation announced the formation of the new International Sustainability Standard Board (ISSB) in November 2021 for the development of global sustainability reporting standards, which will initially focus on climate-related reporting. HK Exchange (HKEx) and Singapore Exchange (SGX) followed such global initiative to push for mandatory Task Force on Climate-related Financial Disclosures (TCFD) disclosures: HKEx published a detailed guide on Climate Disclosures in November to prepare for mandatory TCFD-aligned disclosures by 2025, SGX has also announced that all issuers must include TCFD disclosure in FY2022 on a ‘comply or explain’ basis, and such disclosure will gradually become mandatory in 2023 or 2024. As sustainability disclosure become more standardized, we expect sustainability strategy with specific KPIs to become more prevalent and core to capital market communications in the near future. This should also encourage more harmonization between ESG raters.

10.?全球ESG披露标准统一工作正在进行中，亚太区将迎来强制性ESG披露要求。国际财务报告准则（IFRS）基金会于2021年11月宣布成立新的国际可持续发展标准委员会（ISSB），制定全球可持续发展报告标准，初期重点是气候相关报告。港交所和新加坡交易所（新交所）跟随全球倡议，推动按照“气候相关财务披露工作组”（TCFD）的建议落实强制性披露：港交所于11月发布了详细的《气候信息披露指引》，为到2025年实施与TCFD一致的强制性披露做好准备；新交所也宣布所有发行人必须在2022财年选择或者进行TCFD披露，或者解释未能按要求披露的原因，并将于2023或2024年将TCFD披露逐渐提升为强制性要求。随着ESG披露日趋标准化，我们预计在不久的将来，更多企业将需要设定带有量化KPI的可持续发展战略，并ESG战略将成为资本市场信息沟通的核心之一。我们认为这也将有助推进不同ESG评级机构的ESG评级档位趋同。

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Bonus:

11. APAC economic recoveries are underway, albeit at different paces.?In 2021, we have seen a few positive rating actions for APAC sovereigns such as India, New Zealand, Vietnam and Taiwan, while almost all rating actions were negative in 2020. A waning of liquidity pressure, easing fiscal constraints and increasing competencies in supply chain reconfigurations are the key reasons for positive rating actions. In contrast, tourism-dependent economies continue to suffer from the pandemic, coupled with pre-existing public finance turmoil. Most Asian economies will see growth rebound in 2022, but the outlook for APAC sovereign creditworthiness is stable overall. Sovereigns with higher vaccination rates and trade-oriented economics will lead the recovery, while travel restrictions will continue to be a negative drag. In addition, China’s economic slowdown, further COVID-19 outbreaks and difficult financing conditions associated with US monetary tightening could post challenges too. APAC may see its first sovereign default in many years in 2022 as Sri Lanka, currently split rated at Caa2 / CCC+ / CC, faces looming bond maturities.

11.?亚太经济复苏正在进行中，但有快慢之别。与被负面主权评级行动充斥的2020年相比，2021年评级机构对包括印度、新西兰、越南和台湾等亚太国家/地区给予了正面评级行动。流动性压力减弱、财政赤字收窄，以及供应链恢复是正面评级行动的关键原因。相比之下，依赖旅游业的经济体继续受到疫情影响，令原已存在的公共财政压力雪上加霜。大多数亚洲经济体的增长率将在2022年反弹，但亚太主权信用的前景总体稳定。疫苗接种率较高和贸易导向型经济的主权国家将引领复苏，而旅行限制将继续成为负面拖累。此外，中国经济增长放缓、新冠疫情进一步爆发，以及美国货币紧缩带来的融资困难也可能构成潜在挑战。亚太区或将在2022年出现近年来的首次主权违约——斯里兰卡（目前评级Caa2/CCC+/CC）即将到期的主权债面临偿付风险。

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Source: Moody’s, S&P and Fitch

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