Monthly Archives: April 2014

Asia’s Bond Markets Must Be Ready to Face the Rising Risk of Contagion


JAKARTA, INDONESIA – Emerging East Asia’s local currency bond markets have weathered the recent market volatility well but risks to the markets are ticking up and countries need to be prepared, warns the Asian Development Bank’s (ADB) latest Asia Bond Monitor.


“Good economic data so far this year, attractive yields, and a recovery in some currencies mean Asia is still the best place to invest, but the threat of contagion is certainly higher than it was,” said Iwan J. Azis, Head of ADB’s Office of Regional Economic Integration.




How Well Will Asia-Pacific Sovereigns Stand Up To Geopolitical Risks?

How Well Will Asia-Pacific Sovereigns Stand Up To Geopolitical Risks?

14 February 2014

In this CreditMatters TV segment, Kim Eng Tan, Senior Director and Head of Asia-Pacific Sovereign Ratings, shares his views on the recent geopolitical tensions in Asia-Pacific and how they may affect sovereign ratings.

Fitch: Insolvency Regimes in Spotlight as Investors Look to Next Default Cycle

Fitch Ratings-London/Frankfurt/New York-13 February 2014: Fitch Ratings says in a new report that losses from the next leveraged finance default cycle may be significantly in excess of previous cycles. This reflects weakening new-issue rating mix in bond and loan markets as leverage levels rise and covenants become increasingly lax in both the US and European markets.

“Knowledge of insolvency regimes will be critical to cross-border investors when determining recovery and pricing in relative creditor rights,” says Sharon Bonelli, Managing Director in US Corporates.

 Read full Article at


Global Inflation Beta

It is a familiar concept that commodities have provided inflation protection as discussed in a recent post about a discussion I had with Bluford Putnam, Managing Director and Chief Economist, of our partner, CME Group, to discuss why inflation is likely to appear this year. I have also discussed how much inflation protection has been provided in a special video on commodities and inflation from our Index Matters Series with Bob Greer of PIMCO and Boris Shrayer (formerly) from Morgan Stanley. Inflation and commodities generally move together as shown in the chart below: Source: S&P Dow Jones Indices and/or its affiliates and Data from Jan 2004 to Dec 2013.  Past performance is not an indication of future results. This chart reflects hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with backtested performance. However, in light of the inflation announcement from Feb 20, 2014 that stated US inflation ticked up in January 2014, I have received some questions from investors around the world regarding whether the commodity indices protect them from local inflation.  The answer is that it depends but for most of the countries in the table below, the answer is yes.  As I have explained inflation beta in prior posts, the results can be interpreted as, “if there was a 1% change in CPI, then there was an x% change in the index”. In the table below, the country CPI is compared to both a global flagship, the S&P GSCI, and an international flagship the S&P WCI.  Notice generally the inflation beta is higher from the international benchmark, the S&P WCI.  Also notice for some countries like South Africa and Mexico, there may not be the local inflation protection one might get from other countries. This is not completely surprising given that some countries have local price controls despite the global nature of commodities, discussed in this post including discussions with the CME Group, ICE and NYSE-LIFFE.

Read full post  at

S&P – Top 10 Investor Questions For 2014: Asia-Pacific Corporates

(Editor’s note: Given continuing investor interest in the 2014 credit outlook for Asia-Pacific corporates, this article collates our recent published responses to frequently asked investor questions on Asia-Pacific corporates generally and key sectors specifically.)

Asia-Pacific’s issuers collectively breathed a sigh of relief in late 2013 as the risks of even slower regional economic growth and continuing financial market volatility seemed to be subsiding (see “Asia-Pacific Credit Outlook 2014: A Sigh Of Relief As Growth And Market Risks Subside,” Dec. 10, 2013). The narrowing of the two main risks during 2013 contributed to only a modest pullback in the pace of GDP growth in the region, including China’s, in line with Standard & Poor’s Ratings Services’ base-case scenario (see “Credit Conditions: Asia-Pacific Growth Is Mostly Stable, But Some Lagging Credit Risks Remain For 2014,” Dec. 10, 2013). In fact, China’s growth has stabilized at about the authorities’ target of 7.5%, and the prospect of a hard landing in the near term is increasingly unlikely. Furthermore, capital outflows in the region stemming from speculation about the U.S. Federal Reserve’s tapering of asset purchases (“QE”, or quantitative easing) have taken a breather for now. The local currencies of India and Indonesia, in particular, endured some turmoil when such speculation was rife in markets.

Read full article at 

The Statement Of Cash Flows: Comparing The Incomparable

The statement of cash flows is a key component of Standard & Poor’s Ratings Services’ corporate credit analysis, and the comparability of this information between peer companies is critical. The problem is that no two statements of cash flows are alike. To deal with these inconsistencies in financial reporting, we often make adjustments to the reported amounts and, at other times, consider these differences qualitatively (see “Corporate Methodology: Ratios And Adjustments,” Nov. 19, 2013). In our view, there are ways to improve the transparency and comparability of the statement of cash flows to better enable financial statement analysis.

(Watch the related CreditMatters TV segment titled, “The Statement Of Cash Flows: Avoiding Analytical Pitfalls,” dated Sept. 25, 2012.)

Read full article at

ASEAN+3 Multi-Currency Bond Issuance Framework (AMBIF)

The amount of local currency bonds outstanding in emerging East Asia has grown sharply from less than US$1.0 trillion at the end of 2001 to US$6.5 trillion at the end of 2012.

However, there still remain various issues to be addressed. For example, the region’s bond market is still small in size due to the continued dominance of the banking sector, regional resource channeling needs to be further enhanced, volatile capital flows must be appropriately managed, and there is a need to improve market efficiency.

For a more efficient discussion on implementing cross-border straight-through-processing and streamlining regulations and market practices, the ASEAN+3 Bond Market Forum was established in 2010 to foster standardization of market practices and harmonization of regulations relating to cross-border bond transactions in the region.

The bond markets and infrastructures in the region are rapidly developing by adopting international standards and principles, the efforts toward harmonization and standardization of ASEAN+3 bond markets have only just begun.

Download the report at :

Middle-income Trap Holds Back Asia’s Potential New Tiger Economies: 12 Things to Know

After years of rapid growth, many countries in Asia have advanced to middle-income status. The transition from middle income to high income, however, can be a slow process. Here are 12 things to know about overcoming the so-called middle-income trap in the region.

Regulation of Indian Debt & Derivatives Markets : Some thoughts on post – crisis paradigm

Link to the PPT : Regulation of Indian Debt & Derivatives Markets : Some thoughts on post – crisis paradigm
(A presentation by Shri H.R. Khan, Deputy Governor, Reserve Bank of India at 15th FIMMDA-PDAI Annual Conference, Jaipur on March 8, 2014)

Link to the Speech :


Earnings Per Share 101

In the U.S., there are two main types of income: as reported and operating. As reported income, sometimes called Generally Accepted Accounting Principal (GAAP), is income from continuing operations and it excludes discontinued and extraordinary income. Both of these terms are defined by the Financial Accounting Standards Board (FASB) under GAAP. As reported earnings represent the longest-monitored earnings series available today.

– See more at:

Lack of Consistency, Comparability, And Transparency In Financial Reporting Can Distort Analysis

Few investors will buy a company’s debt or equity without at least a cursory look at its income statement, balance sheet, statement of cash flows, accompanying notes, and the management discussion and analysis. Standard & Poor’s Rating Services believes financial statements too often lack the consistency, comparability, and transparency investors and other financial statement users need for analysis. The reports upon which global financial statement users depend are an amalgam of accounting standards, regulatory mandates, and management discretion, which can result in an unpredictable mix of information–or lack thereof–that makes analyzing financial statements more complicated than we believe necessary. Without an understanding of what financial metrics actually measure, how different industries or comparable companies in the same industry might use those numbers, and how disparate standards can change the disclosures afforded the public, investors risk misunderstanding a company’s financial strength and misallocating their capital.

Read full Article at

Credit Suisse – Does Growth Matter for Equity Returns?

In their 2002 investment classic “Triumph of the Optimists”, Dimson, Marsh and Staunton from the London Business School presented  a controversial finding- that stock market returns are not correlated with past economic growth. In the most recent Credit Suisse handbook ( )they examine this  vexing  issue  further and draw some  intriguing  conclusions which support the above basic premise but also negate  the notion that economic growth does not matter for stock market returns.

S&P Webinar : A Pivotal Election For India’s Sovereign, Banks And Corporates, Apr 17, 2014, 11am

A Pivotal Election For India’s Sovereign, Banks And Corporates

Live Webinar and Q&A

Register Now

Date & Time:

April 17, 2014

Hong Kong/China

12.30 p.m.

Japan/South Korea
2.30 p.m.

11.00 a.m.

4.30 p.m.

Dear Colleague,

Please join us for a live webinar on the possible impact of India’s elections. Registration is complimentary.

Speakers will discuss issues affecting the creditworthiness of India’s sovereign, banks and corporates, in light of the recent elections.

•Kim Eng, Tan,
 Senior Director, Sovereign Ratings 
•Abhishek Dangra, Director, Corporate Ratings
•Amit Pandey, Associate, Financial Institutions Ratings

Full reports on this topic will be emailed to registrants.

Standard & Poor’s Ratings Services’ webinars deliver audio and slides in a streamlined presentation. You will need computer speakers or headphones to listen to the audio stream. You may submit your questions for the presenters in real time via the web interface.

Register now.

We look forward to you joining us.

Yours faithfully,
Dominic Crawley
Senior Managing Director and
Head of Asia-Pacific,
Standard & Poor’s Ratings Services

Visit a free, interactive, and informative portal to access highlights from our credit research offerings. Consider this your portal to perspective:

Does Short selling ban effects CDS pricing, liquidity?

A new ISDA Research Note has been posted on

Adverse Liquidity Effects of the EU Uncovered Sovereign CDS Ban

On November 1, 2012, the provisions of the EU regulation which bans uncovered short-selling of sovereign (single name) CDS came into effect. Market   participants who wish to establish a permitted SCDS position must now hold offsetting risk, such as the underlying sovereign bond. This change raised   concerns about the impact on portfolio hedging, the potential for a reduction in SCDS liquidity and the implications of a reduction in the ECB’s bond-buying program. In this report, ISDA examines the liquidity impact of the regulation one year after implementation. Findings reveal that EU-regulated SCDS and sovereign indices experienced sharp volume and trade count declines. Additionally, proxy hedges were found to become less effective due to a correlation breakdown with European SCDS.

Access full research here :

Moody’s Teleconference ASEAN and Indian BanksPockets of Risk Despite Resilience to US Fed Tapering Tuesday, 15 April 2014 14:00 India

Moody’s Teleconference ASEAN and Indian BanksPockets of Risk Despite Resilience to US Fed Tapering 

Tuesday, 15 April 201414:00 India / 16:30 Hong Kong / 17:30 Tokyo

Discussion Items

·         Strengths: Capital buffers against higher interest rates·         Risks: Rise in debt-servicing burdens and correction in asset prices

·         Peer comparison: More resilient than other emerging markets to US tapering

Speakers : 

Rahul Ghosh, Vice President – Senior Research Analyst

Eugene Tarzimanov, Vice President – Senior Credit Officer, Financial Institutions Group

Moody’s analysts from the Financial Institutions Group, covering ASEAN and Indian banks will also be present to take questions during the Q&A session.  The entire session — with prepared remarks and the Q&A — will last about one hour.If you wish to participate, please RSVP early. Dial-in numbers will be provided.  REGISTER HERE  Registration is required.

Participants are encouraged to submit questions in advance of the teleconference by clicking here. 

Related Research and Methodologies·

Press Release: ASEAN and India banking systems well positioned to cope with tapering and higher interest rates, 8 April 2014 ·

Special Comment: ASEAN and Indian Banks Resilient to US Tapering and Higher Interest Rates7 April 2014 ·

Special Comment: Fed Tapering Will Lead to Greater Credit Differentiation in Asia,11 March 2014   A complete list of Moody’s methodologies may be found here.

World Bank : Growing the Green Bond Market to Finance a Cleaner, Resilient World

  • Green bonds give investors an innovative way of supporting clean energy, mass transit, and other low-carbon projects that can help countries adapt to and mitigate climate change.
  • The World Bank has mobilized over $4.5 billion through 60 green bond transactions in 17 currencies, and the IFC has issued $3.4 billion in green bonds, including two $1 billion issuances in 2013.
  • New Green Bond Principles and a call to double the market by September are helping expand the young market and attracting a new set of investors.

PRM/Moody’s : Introducing Illiquid Investments to Total Portfolio Management and ERM, April 30, 2014 at 12 pm US ET

Presented by Emilian Belev, CFA, ARPM

Head Enterprise Risk Analytics, Northfield Information Services Inc.

Wednesday, April 30, 2014 at 12 pm US Eastern Time

The rigorous risk analysis of illiquid investments like real estate and infrastructure alongside publicly traded investments in an ERM setting has been an object of many attempts, with little practical success until now.  This presentation will outline the details of a new risk model designed for this task.  The model is based in the philosophy of breaking complex investments down to their elemental pieces, and intuitively reassembling them into a coherent whole, using a general risk factor framework. The immediate benefits of this approach are two: a) it enables the rigorous risk measurement and estimation of the relevant factor exposures of investments with unobservable price time series, and b) it allows the seamless integration of measured risks of liquid and illiquid investments.  We present evidence supporting the model results, and share the actual experience of a large scale implementation at a major pension fund.

In particular, we will focus on the following issues:

  • The practical challenges of illiquid investments to risk management
  • The elements of illiquid investment risk
  • Identifying appropriate risk drivers for each of those risk constituents
  • Finding appropriate observable real world measures for the success of a model of the unobservable
  •  The practical implications of setting up such a model in the investment process

The presentation is well suited for Investment Officers, ERM professionals, long term investors, asset managers, senior real estate and infrastructure research staff, as well as academics.

Register here :

GARP Webinar : A New Era in the OTC Market, April 15, 2014, 830pm IST

A New Era in the OTC Market
New rules in the OTC swaps industry have been finalized, triggering a paradigm shift in the market. In this webcast, our experts will discuss how the OTC derivatives market has been reinvented. We’ll move beyond the SEF trading mandate and centralized clearing to focus on a new era of transaction automation and price transparency.

Date Tuesday, April 15, 2014
Time 11:00am EDT—New York
4:00pm BST—London
11:00pm HKT—Hong Kong
Duration 60 minutes


Nathan Jenner
Global Head of Rates
E-Trading, Bloomberg
Bis Chatterjee
Head of Credit Trading, Citi

Questions or comments about this GARP Webcast? Contact us.

About Bloomberg
The BLOOMBERG PROFESSIONAL® service is the interactive financial information network that is Bloomberg’s core business. The BLOOMBERG PROFESSIONAL service provides real-time and historical pricing, indicative data, reporting, research, estimates, analytics, portfolio management tools, electronic trading and order management systems, multimedia events and electronic communications to Bloomberg customers in more than 150 countries, 24 hours a day, in a single integrated desktop solution that is securely accessible to Bloomberg users on any enabled PC or workstation as well as on handheld devices. Market participants use the BLOOMBERG PROFESSIONAL service every day to help them make informed business decisions and to execute transactions. For more information, visit

RBI : RBI seeks Public Comments on Report on Data Format for Furnishing of Credit Information to CICs

RBI seeks Public Comments on Report on Data Format for Furnishing of Credit Information to CICs
The Reserve Bank of India today released on its website for public comments, the Report of the Committee to recommend Data Format for Furnishing of Credit Information to Credit Information Companies (CICs). Comments may please be emailed or sent by post to Chief General Manager, Department of Banking Operations and Development, Reserve Bank of India, Shahid Bhagat Singh Marg, Mumbai 400 001 on or before April 30, 2014.

The committee has made wide ranging recommendations on issues relating to credit information, such as, increasing its coverage, format of reports and best practices to be followed by credit institutions, credit information companies (CICs) and the Reserve Bank.

Making credit information more useful

The committee has stated that low usage of credit information by member institutions and other specified users needs to be addressed by requiring CICs to populate their databases with requisite credit information so that enquiries by specified users yield desired information. It has recommended that this can be done by increasing the coverage of credit information in terms of membership (all credit institutions should be members of all CICs) and products (also covering defaults in CPs and such other products) and by creating awareness about Credit Information Reports (CIRs).

Credit Information Report

The committee’s recommendations relating to CIR are:

  1. CICs should have a common classification of Credit Scores so that it would be easier to understand and interpret them. The Committee has recommended that the CIBIL method of calibrating scores from 300 to 900 could be adopted by other CICs.
  2. CICs should report details of co-borrowers and guarantors.
  3. CICs may provide a single CIR for a borrower even if there are multiple addresses, using a unique identification number (PAN/Aadhaar No.).
  4. CICs may have link with the database of Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) which has data on mortgages so that CIRs can also provide information on property mortgages.
  5. An online data correction mechanism may be put in place by CICs to enable members to confirm/upload correction requests.
  6. CIRs should disclose details of disputes relating to information in CIRs and customer comments thereon, if any.
  7. Customer grievance redressal, especially in respect of complaints relating to updation/alteration of credit information, should be given top priority. This may be integrated with existing redressal systems, such as, Banking Ombudsman Scheme.
  8. Banks/financial institutions (FIs) may report cases of wilful default, even in non-suit filed cases, directly to the CICs of which they are members and the system of banks/FIs reporting information on non-suit filed cases of defaulters to the Reserve Bank of India may be dispensed with.
  9. CICs may make available the data in respect of suit-filed cases on their websites in a more user-friendly manner that would facilitate search across periods and banks.

The Committee has further suggested that providing customers with a free copy of their CIRs would help create awareness about the need to have credit discipline, enable customers to correct their behaviour and improve their score well before they plan to avail fresh credit of any kind, help detect identity theft at an early stage, help CICs correct and validate their database and increase their business in the long run. Use of common data formats, including additional information in the formats, such as, dispute codes, consumer comments on dispute, details of collateral, etc., and institutionalising a continuing mechanism for making changes to data formats could help improve data quality, the committee has pointed out. The committee has recommended a common Data Quality Index that could assist credit institutions in determining the gaps in their data and also help move towards improving their performance over a period of time.


The Second Quarter Review of Monetary Policy 2012-13, (October 2012) of the Reserve Bank of India had stated that credit institutions should furnish timely and accurate credit information on their borrowers and make extensive use of available credit information as a part of their credit appraisal process. The post-policy meeting of the Reserve Bank with bankers in October 2012 had emphasised on the need for standardisation of data collection format as well as harmonisation/convergence among CICs to minimise duplication. The Reserve Bank later also met the heads of CICs and it was suggested that a committee comprising a few banks, CICs and the Indian Banks’ Association be set up to finalise an updated data format. The committee was then set up with the heads of the CICs, a representative each from Private Sector Bank, Nationalised Bank, Foreign Bank, Urban Cooperative Bank, Non-Banking Financial Company (NBFC), Micro-Finance Institution (MFI), Indian Banks Association (IBA) and the Legal Department of the Reserve Bank as members. Shri Aditya Puri, Managing Director, HDFC Bank Ltd. acted as the Chairman of the Committee while Shri Rajesh Verma, CGM, DBOD was its member secretary. The committee recently submitted its report to the Reserve Bank.

Alpana Killawala
Principal Chief General Manager

Press Release : 2013-2014/1869

Webcast: Invest in hard-to-reach asset classes through ETFs. Register now, 8am IST, 16th April

Exchange Traded Funds (ETF) carry a number of advantages, such as lower average expense ratios, simple diversified portfolio construction and flexibility on trading. There is now a growing range of ETF available that you can employ to meet your objectives. Investors may now access timely opportunities across a wide range of asset classes, including less liquid ones such as senior loan, international equities and more.Despite the growth of the ETF industry, ETF trading itself remains an area about which investors are uncertain. Join this webcast to learn in-depth information about sourcing liquidity through ETF trading – beyond just on-screen liquidity. Additionally, we will share best practices for ensuring best execution across your ETF investments.

SPDR ETFs Webinar: Liquidity for the Thirsty
Date: Wednesday, 16 April 2014
Time: 10:30am SG/HK, 11:30am JP, 12:30pm AU
Speakers: Frank Henze, Head of SPDR ETFs, Asia Pacific, State Street Global AdvisorsKevin Quigg, Global Head of SPDR ETF Sales Strategy Group, State Street Global Advisors
Moderator: Jame DiBiasio, Editorial Director, Haymarket Financial Media

About State Street Global Advisors:
State Street Global Advisors (SSgA) is a global leader in asset management. The firm is relied on by sophisticated investors worldwide for its disciplined investment process, powerful global investment platform and access to every major asset class, capitalization range and style. SSgA is the asset management business of State Street Corporation, one of the world’s leading providers of financial services to institutional investors. 

Offered by State Street Global Advisors, SPDR ETFs are a family of exchange traded funds (ETFs) that provide investors with the flexibility to select investments that are precisely aligned to their investment strategy. Recognized as an industry pioneer, State Street Global Advisors created the first ever ETF in 1993 which is currently the world’s largest ETF*. In 1999, SSgA introduced ETFs in Asia Pacific. Currently, State Street Global Advisors manages approximately US$413.6 billion of ETF assets worldwide#. 
* Bloomberg, as of 31 December, 2013. 
#This AUM includes the assets of the SPDR Gold Trust (approx. $30.8 billion as of 31 December 2013), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. Please note that AUM totals are unaudited. 


Editorial Director, Haymarket Financial Media



Frank Henze
Head of SPDR ETFs, Asia Pacific, State Street Global Advisors

Kevin Quigg
Global Head of SPDR ETF Sales Strategy Group, State Street Global Advisors