Upload
urtabaasanjargal
View
86
Download
0
Embed Size (px)
DESCRIPTION
Sovereign Rating Methodology & Mongolia Rating
Citation preview
Sovereign Rating Methodology & Mongolia Rating
Andrew Colquhoun
Head of Asia Pacific Sovereign Ratings
1 www.fitchratings.com
Sovereign Rating Methodology
• Structural Factors
• GDP per capita, share in world GDP
• Financial system stability
• Governance, rule of law
• Macroeconomic
• Sustainable growth without imbalances
• Rate and volatility of growth, inflation
• Public Finances
• Debt level and structure
• Budget deficits and trends
• Market depth, “reserve currency” status
• External Finances
• External debt level, structure
• Current account, FX reserves, liquidity
• Commodity dependence
Sovereign Ratings Distribution of 106 rated sovereigns
Source: Fitch Ratings
Countries
2 www.fitchratings.com
Sovereign Rating Model (SRM)
• Rating model, not sovereign default
probability model
• Empirically based on indicators
referenced in Fitch methodology
• 19 statistically significant indicators
• Forward-looking, through-the-cycle
• Three-year averages used for more
dynamic variables, e.g. fiscal balance,
incorporating one forecast year
• Performance: 80% of actual ratings are
within one notch SRM output (2014)
Source: Fitch “Sovereign Rating Model", August 2014
25%
17%
10%
47%
Structural
Factors
Public
Finances
Macroeconomic
External
Finances
3 www.fitchratings.com
Investment grade Speculative grade
Issuer Default Ratings (IDR)
Cumulative 5-year Probability of Default (ex post)
Note: Sovereigns data for 1995-2011, Corporate Finance data 1990-2011
Source: Fitch
4
www.fitchratings.com
Mongolia
Public debt levels are high
Public Debt Stock (USD m) Public Debt (% of GDP)
Increase in marketable debt Debt levels exceed peers
0
2,000
4,000
6,000
8,000
2010 2011 2012 2013 Q314
Domestic debts
External bonds & guarantees
External concessionary loans
0 50 100
Zambia (B)
Mozambique (B+)
Kenya (B+)
'B' Median
Mongolia (B+)
Egypt (B)
2014e
Source: Ministry of Finance, World Bank, CEIC, Fitch Source: National Sources, Fitch
5
www.fitchratings.com
People’s Bank of China Swap External Liquidity Resources
02,0004,0006,0008,000
10,00012,00014,00016,000
Ja
n-1
3
Ap
r-1
3
Ju
l-13
Oct-
13
Ja
n-1
4
Ap
r-1
4
Ju
l-14
Oct-
14
Ja
n-1
5
PBoC swap (limit)
PBoC swap (drawn)
0
1,000
2,000
3,000
4,000
5,000
6,000
Ja
n-1
3
Ap
r-1
3
Ju
l-13
Oct-
13
Ja
n-1
4
Ap
r-1
4
Ju
l-14
Oct-
14
Ja
n-1
5
PBoC swap (undrawn)
Gross Reserves
High usage of bilateral swap Liquidity resources have declined
Mongolia
External liquidity is weak
Source: CEIC, Bank of Mongolia, Fitch
(CNY m) (USD m)
6
www.fitchratings.com
Mongolia
Key Rating Drivers
Summary Strengths and
Weaknesses
Rating Sensitivities
External Finances are Key to Maintain Rating at B+
Relative to ‘B’ range credits, i.e. those rated B+, B and B-
Source: Fitch
Status Trend
Macroeconomic Neutral Stable
Public Finances Weakness Stable
External
Finances
Weakness Negative
[?]
Structural
Issues
Strength Negative
Negative (Rating Downgrade)
• Continued depletion of external liquidity
resources
• Emergence of systemic financial stress
Revert to Stable Outlook (from Negative)
• A favourable resolution to the Oyu Tolgoi
Phase 2 dispute
• Credible and coherent macroeconomic
policy-making that increases confidence in
Mongolia’s basic economic stability
7 www.fitchratings.com
Disclaimer
Fitch Ratings’ credit ratings rely on factual information received from issuers and other sources.
Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings
are inherently forward-looking, embody assumptions and predictions that by their nature cannot be
verified as facts, and can be affected by future events or conditions that were not anticipated at the
time a rating was issued or affirmed.
The information in this presentation is provided “as is” without any representation or warranty.
A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not
address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned.
A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its
agents in connection with a sale of securities.
Ratings may be changed or withdrawn at any time for any reason in the sole discretion of
Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not
a recommendation to buy, sell, or hold any security.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE
LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT WWW.FITCHRATINGS.COM.