20171206-穆迪服务-Amid_Nearby_Sabre_Rattling,_South_Korea_s_Sovereign_Risk_Tripled_This_Year,_Recovered_Notably_in_November_18页_802kb

Moody's Capital Markets Research Summary - December 6, 2017

Core Content

This document provides an analysis of sovereign and supranational credit risk metrics for various countries as of December 2017. It outlines the changes in the Expected Default Frequency (EDF) and Credit Default Swap (CDS) spreads, along with implied ratings and senior ratings, to reflect the market's perception of credit risk.

Key Information

• South Korea's Sovereign Risk:

  • The 5-year EDF metric for South Korea peaked at 0.30% on October 31, 2017, which was the highest since 2013.
  • The risk was driven by international tensions over North Korea's nuclear and missile programs.
  • After November 7, the EDF dropped steadily to 0.23% on November 28.
  • On November 29, North Korea announced a new missile capable of reaching the US, causing the EDF to rise again.
  • The 5-year CDS spread followed a similar trend, peaking at 76 bp on September 28 and dropping to 59 bp on November 29.
  • The market-implied rating for South Korea's 5-year EDF was A1 in January and dropped to Baa1 by late November, which is still in investment grade.
  • Moody's Investors Service maintained its Aa2 rating for South Korea throughout the year.

• Asia-Pacific Overview:

  • Australia: 5-year EDF remained stable at 0.06%, with a CDS implied rating of Aa1 and a senior rating of Aaa.
  • China: 5-year EDF decreased by 13 bps, from 0.34% to 0.21%, with a CDS implied rating of Baa1 and a senior rating of Aa1.
  • Hong Kong: 5-year EDF increased by 6 bps to 0.12%, with a senior rating of Aa2.
  • Indonesia: 5-year EDF decreased by 13 bps to 0.38%, with a CDS implied rating of Ba1 and a senior rating of Baa3.
  • Japan: 5-year EDF increased by 3 bps to 0.10%, with a CDS implied rating of Aa2 and a senior rating of A1.
  • Malaysia: 5-year EDF decreased by 31 bps to 0.23%, with a CDS implied rating of Baa2 and a senior rating of Aa1.
  • Philippines: 5-year EDF decreased by 13 bps to 0.38%, with a CDS implied rating of Baa2 and a senior rating of A3.
  • Thailand: 5-year EDF decreased by 89 bps to 2.23%, with a CDS implied rating of Ba2 and a senior rating of Caa2.
  • Vietnam: 5-year EDF increased by 1 bps to 0.49%, with a CDS implied rating of Ba2 and a senior rating of B1.

Europe Overview

• Austria: 5-year EDF decreased by 3 bps to 0.05%, with a CDS implied rating of Aa1 and a senior rating of Aaa.
• Belgium: 5-year EDF decreased by 2 bps to 0.06%, with a CDS implied rating of B3 and a senior rating of Baa2.
• Bulgaria: 5-year EDF decreased by 12 bps to 0.34%, with a CDS implied rating of Ba1 and a senior rating of Baa3.
• Croatia: 5-year EDF decreased by 17 bps to 0.33%, with a CDS implied rating of Ba1 and a senior rating of Baa3.
• Cyprus: 5-year EDF decreased by 11 bps to 0.57%, with a CDS implied rating of B3 and a senior rating of Baa2.
• Denmark: 5-year EDF decreased by 2 bps to 0.05%, with a CDS implied rating of Aa1 and a senior rating of Aaa.
• Estonia: 5-year EDF decreased by 1 bps to 0.15%, with a CDS implied rating of A3 and a senior rating of A3.
• Finland: 5-year EDF decreased by 2 bps to 0.06%, with a CDS implied rating of Baa1 and a senior rating of Aa1.
• France: 5-year EDF decreased by 4 bps to 0.06%, with a CDS implied rating of B3 and a senior rating of Aa2.
• Germany: 5-year EDF decreased by 2 bps to 0.03%, with a CDS implied rating of Aaa and a senior rating of Aaa.
• Greece: 5-year EDF decreased by 89 bps to 2.23%, with a CDS implied rating of B3 and a senior rating of Caa2.
• Hungary: 5-year EDF decreased by 8 bps to 0.33%, with a CDS implied rating of Ba1 and a senior rating of Baa3.
• Iceland: 5-year EDF increased by 1 bps to 0.29%, with a CDS implied rating of Baa3 and a senior rating of A3.
• Italy: 5-year EDF decreased by 17 bps to 0.50%, with a CDS implied rating of Ba2 and a senior rating of Baa2.
• Latvia: 5-year EDF decreased by 1 bps to 0.15%, with a CDS implied rating of A3 and a senior rating of A3.
• Lithuania: 5-year EDF increased by 2 bps to 0.19%, with a CDS implied rating of A3 and a senior rating of A3.
• Netherlands: 5-year EDF decreased by 1 bps to 0.05%, with a CDS implied rating of Aaa and a senior rating of Aaa.
• Norway: 5-year EDF remained stable at 0.04%, with a CDS implied rating of Aaa and a senior rating of Aaa.
• Poland: 5-year EDF decreased by 7 bps to 0.17%, with a CDS implied rating of Baa1 and a senior rating of A2.
• Portugal: 5-year EDF decreased by 30 bps to 0.46%, with a CDS implied rating of Ba2 and a senior rating of Ba1.
• Romania: 5-year EDF increased by 5 bps to 0.36%, with a CDS implied rating of Ba1 and a senior rating of Baa3.
• Russia: 5-year EDF increased by 1 bps to 0.55%, with a CDS implied rating of Ba2 and a senior rating of Ba1.
• Slovakia: 5-year EDF increased by 4 bps to 0.15%, with a CDS implied rating of A2 and a senior rating of A2.
• Slovenia: 5-year EDF decreased by 3 bps to 0.23%, with a CDS implied rating of Baa2 and a senior rating of Baa1.
• Spain: Data is incomplete, but the 5-year EDF decreased slightly.

Main Points

• Sovereign Risk Drivers: The risk levels were influenced by geopolitical tensions, particularly related to North Korea's nuclear and missile programs.
• EDF Trends: Most countries experienced a decline in their 5-year EDF metrics in November, indicating a reduction in perceived sovereign risk.
• CDS Spread and Implied Ratings: CDS spreads followed similar trends as EDF metrics, with some countries showing more volatility.
• Senior Ratings: These ratings remained relatively stable for most countries, with a few exceptions showing minor changes.
• Market Implied Ratings: These ratings reflect market sentiment and can differ from Moody's Investors Service ratings, which are more fundamental in nature.

Conclusion

The analysis highlights the dynamic nature of sovereign credit risk, influenced by geopolitical events and market conditions. While some countries saw a notable decrease in risk metrics, others experienced increases, particularly in response to North Korea's military activities. The data underscores the importance of monitoring both EDF and CDS spreads as indicators of market risk perception, alongside the more stable senior ratings.