2010-07-13

Chinese credit rating agency Dagong cuts U.S. credit rating

There's certainly an opening for competitors in the ratings agency game, given the performance of the firms. David Einhorn described the problem in his speech to the Value Investing Congress in 2009.
My firm recently met with a Moody’s sovereign risk team covering twenty countries in Asia and the Middle East. They have only four professionals covering the entire region. Moody’s does not have a long-term quantitative model that incorporates changes in the population, incomes, expected tax rates, and so forth. They use a short-term outlook – only 12-18 months – to analyze data to assess countries’ abilities to finance themselves. Moody’s makes five-year medium-term qualitative assessments for each country, but does not appear to do any long-term quantitative or critical work.

Their main role, again, appears to be to tell everyone that things are fine, until a real crisis emerges at which point they will pile-on credit downgrades at the least opportune moment, making a difficult situation even more difficult for the authorities to manage.

Dagong rates the United States one notch below the other ratings agencies and it is the highest rated country with a negative outlook.
Sovereign Credit Rating Report of 50 Countries in 2010

Dagong Global Credit Rating
大公国际资信评估有限公司

H/T: Dian L. Chu

No comments:

Post a Comment