Criat

🎄✨ Happy holidays from Criat! ✨🎄 As we celebrate this joyous season, we want to extend our warmest wishes to you and your loved ones. May your holidays be filled with happiness, peace, and prosperity. Please note that our social media channels will be taking a short break this week and next week to allow our team to enjoy the holiday season. We'll be back with more updates and exciting news in the new year! Thank you for your continued support. Happy New Year! 🎁🎉

⬇️Here is our analysis of the latest credit risk dynamics in Asian Investment-grade US dollar bond markets⬇️ External rating agencies' results often lag and do not accurately reflect the latest credit status of issuers. 🌟 Unlike the Through-the-Cycle (TTC) ratings by external agencies, Criat's Point-in-Time (PIT) ratings, with dynamic updates, can quickly capture the latest credit risk dynamics and reflect the most recent changes in credit risk🌟 To comprehensively analyze the true state of the Asian investment-grade USD bond market, we selected all USD bonds currently rated as investment-grade by Moody's and S&P in Southeast Asia, China, Japan, and South Korea. We conducted an in-depth analysis of their true risk levels (with Criat PD) and their corresponding yield conditions (Z-spread) from the perspective of each economy: - Risk Level: Although these bonds are all rated as investment-grade by external ratings, their true risks vary significantly. Investment-grade USD bonds from Hong Kong and Indonesia have relatively higher risk levels, while those from Singapore, Japan, and Malaysia have relatively lower risk levels. - Yield Level: The Z-spread of investment-grade USD bonds also shows significant differentiation. Bonds from Indonesia and Thailand have higher yields, while those from Singapore, Japan, China, and South Korea have relatively lower yields. - Risk-return Ratio: We evaluated the risk-return ratio of each economy by dividing the Z-spread by the PD. The results show that Singapore, Japan, Malaysia, and Thailand have the highest investment efficiency. However, it is important to note that although investment-grade USD bonds from Singapore and Japan are known for their low default risk, their overall yield levels are relatively low, with Z-spreads of around 45bps and 63bps, respectively. In contrast, Malaysia's yield is slightly higher, with a Z-spread of about 95bps. Thailand has the highest yield among these four economies, with a Z-spread of about 128bps, but its risk level is also relatively high, with an overall PD of about 21bps. To find out more about our credit risk insights, message us or email enquiry@criat.sg referencing the LinkedIn post. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #economy #countryrisk #assetmanagement The TRADE News Financial Times Nikkei Asia Reuters The Wall Street Journal Bloomberg News The Australian Financial Review The Business Times

❓ How are Japanese car manufacturers doing when the global automotive industry is undergoing significant changes❓ Less than a month after Nissan announced layoffs, production cuts, and lowered profit forecasts, the news of Nissan's CFO Stephen Ma's departure has further heightened concerns about the future of this Japanese automotive giant. 🌟 We conducted a risk analysis of the top 8 Japanese car manufacturers by market value🌟 Despite a general increase in risk levels over the past year, the median PD for these 8 companies currently stands at 11.92 basis points, indicating a healthy outlook overall. In the second fiscal quarter (July to September), Nissan reported a net loss of 9.3 billion yen, a stark contrast to the net profit of 190.7 billion yen in the same period last year. Other Japanese car manufacturers such as Toyota, Honda, Mitsubishi, and Mazda have also reported year-on-year declines in net profits. In response to market challenges, Toyota and Honda have been adjusting their market strategies and undergoing strategic transformations over the past few years, with continuous investments in electrification and smart technologies. This has enabled them to maintain stable sales growth in the global automotive market. Nissan's PD is the highest among the 8 car manufacturers, reaching 31.29 basis points. Compared to the PD trends over the past 5 years, Nissan's current risk level has surpassed the peak during the pandemic, setting a new high in 5 years. The root of Nissan's predicament lies in its weak product line. In the current market environment, Nissan faces significant challenges. To find out more about our credit risk insights, message us or email enquiry@criat.sg referencing the LinkedIn post. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #economy #countryrisk #assetmanagement Financial Times Nikkei Asia Reuters The Wall Street Journal Bloomberg News The Australian Financial Review The Business Times

⚠️ Credit risk is rising in the Nordic region, with Sweden leading⚠️ Recently, Northvolt, a Swedish battery manufacturer seen as Europe's future hope, filed for bankruptcy protection in the US.  This event also reflects the rising economic risks in the Nordic region, impacting not only the battery industry but also potentially causing ripple effects on supply chain stability and the job market. 🌟 Using our dynamic forward-looking Credit Risk Cycle Index (Criat CCI), we have conducted an in-depth analysis of the current risk outlook of the 5 Nordic countries🌟 Although the risk levels in the five Nordic countries are not high, the risk levels in Sweden, Norway, Finland, and Denmark have all shown an upward trend in H2 2024. - Sweden: Sweden's economy is highly dependent on global demand, therefore challenged in the increasing global economic uncertainty. The IMF states that Sweden's projected economic growth will remain sluggish this year, with an average growth rate of 0.2%. According to data released by Statistics Sweden, Sweden's GDP contracted by 0.1% quarter-on-quarter in Q3, falling short of the market's expected rebound of 0.4%. This indicates that Sweden's economy has entered a technical recession. Northvolt's bankruptcy also casts a shadow over Sweden's risk outlook. - Iceland: Iceland was severely hit by the 2008 financial crisis but has achieved a remarkable recovery over the past decade through a series of adjustments. Although tight macroeconomic policies may temporarily suppress Iceland's economic growth, the medium-term growth outlook remains positive. Iceland's projected economic growth according to IMF would rise to 2% in 2025. To find out more about our credit risk insights, message us or email enquiry@criat.sg referencing the LinkedIn post. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #economy #countryrisk #assetmanagement Financial Times Nikkei Reuters The Wall Street Journal Bloomberg The Australian Financial Review The Business Times

👀 Criat’s country risk, industry risk and entity risk analyses reveal that Germany’s credit risk level is rising, with significant risk accumulation over the past 3 years. The collapse of Scholz's "traffic light" coalition, as well as Donald Trump's US election victory triggered deep uncertainty about the future of Germany’s and Europe’s economy and security. The German Council of Economic Experts dropped Germany’s 2025 GDP growth forecast to 0.4% in their latest report. The automotive industry, a crucial pillar of the German economy, has seen a major downturn with significant profit declines in the leading firms. Volkswagen's Q3 report shows the operating profit margin dropping from 6.2% to only 3.6%. Audi's operating profit plummeted by 91%. BMW and Mercedes-Benz have also suffered substantial profit declines. 🌟 Using our forward-looking PD term structure, we have projected the PD implied ratings (PDiR) for all German companies🌟 - Among the 587 listed companies in Germany, there are 241 currently rated BBB, which accounts for 41% of all listed companies in Germany. This is followed by BB-rated companies, totaling 174. - German companies face downgrade risks. Most companies' ratings are expected to downgrade within the next 6 months. Specifically, we forecast that within the next 6 months, 84 companies will be downgraded from investment grade (BBB and above) to speculative grade (BB and below). - After 6 months, we forecast that the number of BB-rated companies will increase to 247, accounting for 42% of all listed companies in Germany, while BBB-rated companies will decrease to 196, accounting for 33%. To find out more about our credit risk insights, message us or email enquiry@criat.sg referencing the LinkedIn post. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #economy #countryrisk #assetmanagement Financial Times Nikkei Reuters The Wall Street Journal Bloomberg The Australian Financial Review The Business Times AustralianSuper

Seeing global capital flows changing significantly with the trend of rate cuts --- where to invest now❓ The world is seeing a series of rate cuts to stabilize the global economy: Sweden -- 50 basis points. UK -- 25 basis points US -- 25 basis points in the second cut since Sept and hinting at more in Dec. Policy measures introduced by China since late Sept to stabilize growth have attracted a substantial amount of overseas capital to the Chinese market. According to Goldman Sachs, in the four weeks leading up to 30 Oct, the A-share market saw a net inflow of $24.38 billion. Market analysts believe that this policy adjustment will help attract more high-quality foreign capital, enhancing the appeal of China's capital market. 🌟 We have analysed the global stock market to provide a deeper understanding of the current risk profile breakdown of all listed companies from a global perspective. 🌟 Based on Criat’s PDiR (PD implied Rating, 21 notched, ranging from AAA to C), we place global listed companies into four categories: A and above, BBB, BB, B and below. Our analysis shows: ·        Among all companies rated A and above, the number of Chinese listed companies is relatively small compared to the US and Europe, with a noticeable gap. ·        Among the BBB-rated companies, the proportion of Chinese listed companies is higher than that of the US and Europe. ·        Among the BB-rated companies, Chinese listed companies account for approximately a quarter. ·        Among the companies rated B and below, China and the US together account for nearly half of the global total. BBB-rated companies have the highest number among global listed companies, reaching about 37%, with over 16,000 companies. For investors seeking higher returns with a certain level of risk appetite, BBB-rated companies are attractive when risks are manageable. As the lowest grade in the investment category, in the increasing global economic uncertainty, BBB-rated companies can offer investors a balance point between risk and return. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #economy

🚗 The global automotive industry is undergoing the most profound transformation in a century with the rise of electric vehicles (EV). BYD’s revenue surpassed Tesla for the first time in Q3 2023, quickly becoming a focal point of attention in the industry. However, Ford seems to have been unprepared for the competition. On Oct 29, Ford released its Q3 financial report. Hybrid vehicles “have been a great success for us”, says Ford CFO John Lawler on Q3 results. However, after the financial report was released, the company’s stock price plummeted by 8.44%, and its market value evaporated by more than $3.8 billion. Upon analyzing the financial report, it was found that Ford’s main revenue still relies on the sales of traditional fuel vehicles. The discrepancy between the CFO’s evaluation and the market’s reaction reveals the challenges Ford faces in its transition to electric vehicles, reflecting investors’ latest attitudes and preferences in the automotive industry. 🌟 To further analyze the EV industry and Ford’s risk profile, we selected the top 20 EV companies based on their sales in the first half of 2024 as representatives of the EV industry and compared them with the entire automotive industry. The results show that the current PD of EV industry is higher than that of the global automotive industry and has been rising continuously over the past 3 years. The transition from traditional vehicles to EV is not easy, as it often requires substantial capital expenditures and R&D investments to build infrastructure and expand production capacity, which may put pressure on companies’ cash flow and credit conditions. Ford is a typical example of this transition challenge. Among the top 20 EV companies, there are three US companies: Tesla (ranked 2nd), General Motors (ranked 5th), and Ford (ranked 20th). Through comparative analysis, we found that: ·      Tesla’s PD is lower than that of global automotive industry and EV industry, with the latest PD approaching the lowest value in three years, indicating a healthy risk outlook. ·      GM’s PD is higher than Tesla’s, but its PD has been improving over the past three years, with the latest PD lower than its three-year average, gradually approaching the lowest value in three years, showing significant risk improvement. ·      Ford’s latest PD is 146.27 bps, a new high in three years, far higher than the industry average and also far higher than the PD of Tesla and GM. Ford's electric vehicle sales in the third quarter were only 23,509 units, lagging behind GM. Ford, while maintaining a competitive edge in the commercial and traditional fuel vehicle markets, is seeing its overall performance constrained by the difficulties in its EV business. The challenge of coordinating traditional automotive and electric vehicle businesses is also a problem the entire EV industry needs to address. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis

Criat utilizes 🌟BuDA (Bottom-up Default Analysis), our automated stress testing & scenario analysis toolkit🌟, to support the assessment of the potential impact of different election outcomes on the APAC credit risk outlook. Find out more about BuDA: https://lnkd.in/dYhdAAFy Quantitative analysis relies on historical data and preset assumptions. As the impact of political events is often complex, it is impossible for quantitative analysis to precisely predict the future impacts. Yet it can still provide a forecast of future market trends and the potential extent of the impacts. This quantitative analysis focuses on the impact of macroeconomic indicators on the credit risk of financials and corporates (non-financials) in the region. Our chief economist, Dr. Zhu Yanqi, has constructed the expected macroeconomic trends in US stock market, US Treasury Bond yield, Gold Price and US Dollar under scenarios where Trump or Harris wins. In our analysis, a Republican victory may have a neutral to positive impact on the trends due to Trump's economic policy proposals, expected inflation increase. A Democratic victory may have a neutral to slightly negative impact on the trends due to the potential tax increases and stricter regulations; expected dovish stance of the Federal Reserve; potential higher fiscal spending; and other global economic conditions. We establish a connection between the changes in macroeconomic indicators and the changes in entity PD to obtain the future trend of each company’s PD. By aggregating in a bottom-up approach, we then obtain the future trend of the median PD of APAC region in different scenarios. Our analysis reveals that: ·      Short-term (by the end of 2024): Regardless of the US election outcome, the PD trend in APAC region is expected to remain consistent, with a slight increase in the next two months. We believe that the spillover effects of the US election result may only gradually emerge in 2025, so the increase in risk in 2024 is mainly attributed to the region’s own momentum effect. ·      Long-term (by the end of 2025): In the financial sector, PD shows a slow upward trend regardless of whether Trump or Harris is elected, but increase in PD is more significant under a Trump victory; in the corporate sector, a Trump victory will lead to an initial increase in PD followed by stabilization, slightly higher than the trend under a Harris victory scenario where PD increases and then decreases. ·      Although the US election has an impact on the credit risk of APAC region, the overall impact is relatively limited. Under both election scenarios, PD shows an upward trend but does not reach the highest point of PD over the past three years. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #USelection

👀 According to the International Monetary Fund, Indonesia is expected to become the world's sixth-largest economy in three years, following the United States, China, Japan, Germany, and India. The new President Prabowo stated that under his leadership, Indonesia aims to achieve an 8% economic growth target, significantly higher than the recent average growth rate of around 5%. During his ten-year presidency, the former president Jokowi led Indonesia to achieve an average annual economic growth of over 5%, with a cumulative GDP increase of 43% compared to the previous administration. In early October, at an investor summit hosted by the Bank of Indonesia, Jokowi stated in his speech that the global economic center has entered the "Asian Century," shifting from the "West" to "Asia." He predicted that three economic superpowers will emerge in Asia in the future—China, India, and Indonesia. However, he also noted that Indonesia faces many challenges in achieving its goal. 🌟 We have conducted a risk analysis of the overall Indonesian market to help investors better understand the industry risk outlook in Indonesia. We adopted a bottom-up approach, demonstrating the risk level of each industry by calculating the median PD of all companies within that industry. 🌟 We analyzed each industry from two dimensions: 1) the comparison of the industry within Indonesia to other domestic industries. 2) the comparison of the industry in Indonesia to similar industries in other ASEAN countries. In the chart below, each bubble represents an industry in Indonesia, with the size of the bubble indicating the level of PD. The x-axis represents the percentile of the industry among all 20 industries in Indonesia, and the y-axis represents the percentile of Indonesia in the industry among 7 ASEAN countries. The second quadrant shows 5 industries that perform strongly domestically in Indonesia but show some vulnerability at the ASEAN regional level: 1) Banking 2) Insurance 3) Real Estate 4) Financial Services 5) Consumer Staple Products. Notably, all financial industries (banking, insurance, and financial services) are located in the second quadrant. The domestic banking industry in Indonesia is relatively robust, with the Indonesian banking system demonstrating high resilience in the face of external shocks. Additionally, the stability of the Indonesian interbank market is attributed to strict capital entry thresholds, high capital adequacy ratios, diverse external regulatory measures, systematic crisis management agreements, and a well-established bank exit mechanism. However, compared to the banking industry in other ASEAN countries, Indonesia's market size is relatively small, and there are differences in the development of capital markets and insurance markets, resulting in a relatively high risk level in regional comparisons. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #ASEAN

On 11 Oct, Boeing announced a global layoff plan, expecting to cut about 10% of its total workforce and also revealed a delay in the rollout of the new 777X plane to 2026. Airbus also announced a layoff plan on 16 October, expecting to cut up to 2,500 positions. The reason behind this decision is the “fast-changing and very challenging business context with disrupted supply chains, rapid changes in warfare and increasing cost pressure due to budgetary constraints”. Faced with market contraction and decreased consumer demand due to the pandemic, both companies are adopting strategies such as controlling expenses, optimizing resource allocation, and strengthening technological innovation to maintain competitiveness and adapt to changes. Although we believe that these measures will have positive effects in the long term, the companies face challenges in the short term. Against the backdrop of rapidly changing market dynamics, accurate and objective risk assessment of these companies becomes particularly important for investors. 🌟 We analyzed the risks of Boeing and Airbus with Criat's Probability of Default with data-driven quantitative models🌟 ·      From January to August 2024, Boeing's PD rose from 3bps to 20bps. ·      In August 2024, Boeing's PD saw a significant jump, mainly attributed to its poor financial performance in the semi-annual report. ·      So far in 2024, Airbus's PD has remained stable, fluctuating overall below 10bps. ·      Our analysis anticipates that Boeing's PD will continue to rise in the short run primarily due to its current poor financial and stock market performance. Last Friday, Boeing also released preliminary estimated financial data for the third quarter, expecting a revenue of $17.8 billion and a GAAP loss per share of $9.97, marking the largest quarterly loss in nearly four years. It is worth noting that Boeing has taken active measures this week. Boeing plans to raise up to $25 billion by issuing stocks and bonds over the next three years to support its balance sheet. This strategic move is expected to enhance Boeing's financial flexibility and alleviate its short-term liquidity pressure. However, considering Boeing's currently weak fundamental situation, we remain cautious about the company's current credit risk outlook. ·      Our analysis anticipates Airbus's PD to slightly rise but remain relatively stable. The company achieved strong growth in 2023 and delivered more commercial aircrafts. This helped to strengthen the company's cash flow and financial stability, supporting its credit situation. However, due to factors such as the industry's inherent cyclicality, competitive pressure, geopolitical risks, and supply chain challenges, Airbus's risk profile may slightly increase as a result. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis