Research Publication: Evaluating the Performance of Credit Ratings Using Default Data and Quantitative Measures 2022


12 Jul 2022

    HONG KONG, 12 July 2022. Pengyuan International has today published a research report “Evaluating the Performance of Credit Ratings Using Default Data and Quantitative Measures 2022”. 

    This research utilizes the quantitative assessment approach (i.e., discriminatory power, predictive accuracy and rating stability) outlined in the research report “Evaluating the Performance of Credit Ratings Using Default Data and Quantitative Measures” to assess the performance of credit ratings issued by seven Chinese credit rating agencies (CRAs) from 2014 to 2021.

    In terms of discriminatory power, we examined whether the CRAs’ ratings can effectively differentiate between issuers that will default within one year. The results of AUROC (Area Under the Receiver Operating Characteristic Curve), AR (Accuracy Ratio) and K-S statistic (Kolmogorov-Smirnov Statistic) show that China Bond Rating and CSCI Pengyuan perform relatively well. In comparison to two years ago, the AUROC of Golden Credit Rating and Dagong Global Credit Rating (Dagong Global) have declined considerably, while the AUROC of the other five CARs have changed just slightly.

    In terms of predictive accuracy, we evaluated whether the average one-year default rate with respect to each rating level is consistent with the expectations. The findings indicate that China Bond Rating, CSCI Pengyuan and China Chengxin International Credit Rating (CCXI) are the three CRAs with good prediction accuracy, and CSCI Pengyuan has improved its predictive accuracy over the past two years.

    In terms of rating stability, we assessed the stability of ratings by constructing transition matrices and calculating the frequency and magnitude of the upgrades and downgrades. According to the results, CSCI Pengyuan and CCXI have higher rating stability. Compared with two years ago, Lianhe Credit Rating, Shanghai Brilliance Credit Rating and CCXI have significant increases in their one-year, two-year and three-year affirming rates, while China Bond Rating and Golden Credit Rating saw sight decreases in their the one-year affirming rates .

    Note: This press release is a translation of the original in Chinese. If there is any inconsistency or ambiguity between these two versions, the Chinese original will prevail.

     

    ANALYSTS CONTACT

    Primary Analyst                                 

    Ke Chen, PhD                                     

    +852 3615 8316                                  

    ke.chen@pyrating.com

    Secondary Analyst

    Bining Cai

    +86 18826482803

    bining.cai@pyrating.com

    Committee Chair

    Winnie Guo

    +852 3615 8344

    winnie.guo@pyrating.com

    MEDIA ENQUIRIES
    media@pyrating.com

    RATING SERVICES ENQUIRIES
    Allen Wei
    +852 3615 8324
    allen.wei@pyrating.com

    Date of Relevant Committee: 29 June 2022

    Additional information is available on www.pyrating.com

     

    DISCLAIMER

    Pengyuan Credit Rating (Hong Kong) Company Ltd (“Pengyuan International”, “Pengyuan”, “the Company”) prepares various credit research and related commentary (collectively “research”) in compliance with the established internal process. The Company reserves the right to amend, change, remove, publish any information on its website without prior notice and at its sole discretion.

    The research is subject to disclaimers and limitations. RESEARCH AND CREDIT RATINGS ARE NOT FINANCIAL OR INVESTMENT ADVICE AND MUST NOT BE CONSIDERED AS A RECOMMENDATION TO BUY, SELL OR HOLD ANY SECURITIES AND DO NOT ADDRESS/REFLECT MARKET VALUE OF ANY SECURITIES. USERS OF RESEARCH AND CREDIT RATINGS ARE EXPECTED TO BE TRAINED FOR INDEPENDENT ASSESSMENT OF INVESTMENT AND BUSINESS DECISIONS.

    This research is based solely on the public data and information available to the authors at the time of publication of this research. For the purpose of this research, the Company obtains sufficient quality factual information from public sources believed by the Company to be reliable and accurate. The Company does not perform an audit and undertakes no duty of due diligence or third-party verification of any information it uses in the research. The Company is not responsible for any omissions, errors or inconsistencies of the public information used in the research.

    NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF ANY INFORMATION GIVEN OR MADE BY THE COMPANY IN ANY FORM OR MANNER. In no event shall the Company, its directors, shareholders, employees, representatives be liable to any party for any damages, expenses, fees, or losses in connection with any use of the information published by the Company.

    This research focuses on observing trends from the credit markets. This research has not been made available to any issuer prior its distribution to the public. The Company does not receive compensation for its research.

    The Company reserves the right to disseminate its research through its website, the Company’s social media pages and authorised third parties. No content published by the Company may be modified, reproduced, transferred, distributed or reverse engineered in any form by any means without the prior written consent of the Company.

    The Company’s research is not intended for distribution to, or use by, any person in a jurisdiction where such usage would infringe the law. If in doubt, please consult the relevant regulatory body or professional advisor and ensure compliance with applicable laws and regulations.

    In the event of any dispute arising out of or in relation to our research, the Company shall have absolute discretion in all matters relating to resolving the dispute, including but not limited to the interpretation of disclaimers and policies.

    Copyright © 2022 by Pengyuan Credit Rating (Hong Kong) Company Ltd. All rights reserved.