June 27, 2013 / 1:06 AM / 7 years ago

Fitch: Rated Chinese MMFs Weather Volatility

(The following statement was released by the rating agency) BEIJING/PARIS/SINGAPORE, June 26 (Fitch) Fitch Ratings says rated Chinese money market funds (MMFs) have so far weathered the tight liquidity conditions in China's financial sector. This reflects the high liquidity and shorter maturity profiles of these MMFs relative to the broader MMF universe in China. Fitch rates four MMFs in China 'AAAmmf(chn)' applying its national scale criteria for MMFs in less developed economies , totalling CNY30.7bn of assets as of 25 June. Volatile interbank market conditions and tight liquidity have exerted pressure on the mark-to-market net asset value (NAV) of many Chinese MMFs which are, by their nature, heavily exposed to interbank markets and short term bond markets. The overnight Shanghai interbank offered rate (SHIBOR), an average of the rate at which large banks lend between them, rose to 5.5% on June 25 2013from 3.0% on 20 May 2013, down from a high of 13.4% on 20 June. Fitch understands that certain unrated MMFs in China have experienced material mark-to-market declines in their NAVs and at least one unrated MMF has halted redemptions. At this time, the four Fitch-rated Chinese MMFs' liquidity, credit profiles and NAVs are consistent with the assigned rating and any deviations in NAV from par are well within the 50 bps allowed by regulation. This reflects the funds more conservative portfolio guidelines relative to the industry overall and the regulatory minimum. Rated funds limit the average maturity to reset of their portfolios to 75 days or less, as per Fitch's 'AAAmmf(chn)' rating guidelines, against a maximum of 180 days under Chinese regulation. Furthermore, the exposure to assets maturing in seven days or less ranged from 39% to 100% in Fitch rated funds as of 25 June 2013. Besides, investments are restricted to stock-exchange listed repos, sovereign and policy banks instruments, deposits with five state banks and selected corporate papers that meet Fitch's criteria of a foreign currency Issuer Default Rating (IDR) of at least 'A-'. Exposure to interbank repo is expected to be kept at a low level with counterparties limited to the five state banks only. Rated funds also don't employ leverage. Conditions in the money markets have stabilized recently. Nonetheless, current liquidity conditions remain tight and, therefore, rated money market funds are keeping their portfolios shorter-dated and maintaining high levels of liquidity to meet potential redemptions without being forced to sell assets into a less liquid market. Redemption pressure, thus far, has not been abnormally high for these funds. While rated MMFs have weathered conditions so far, they continue to face challenging conditions and need to maintain ample liquidity against unexpected redemptions to avoid selling assets and crystalizing losses. Notably, there is risk of heightened redemption activity as we approach quarter ends. Fitch is in close contact with the funds' managers and is closely monitoring redemption activity and NAVs. Fitch will continue to assess the funds' ability to offer capital preservation and timely liquidity as described in its National Scale Money Market Fund rating criteria. An inability to maintain extremely high liquidity and/or a material impairment of a fund's NAV would likely trigger a rating action by Fitch. Fitch rates the following Chinese money market funds : China International Fund Management Money Market Fund (CIFM) rated 'AAAmmf (chn)' Gao Hua Sheng Yu Money Market Collective Investment Scheme rated 'AAAmmf (chn)' Harvest Prime Liquidity Money Market Fund rated 'AAAmmf (chn)' HFT Liquid Money Market Fund rated 'AAAmmf (chn)' Contact: Aymeric Poizot, CFA, CAIA Managing Director +33 1 44 29 92 76 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Hiddy He Associate Director Financial Institutions +86 10 8517 2135 Roger Schneider, CIIA Senior Director +49 69 76 80 76 242 Media Relations: Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. Related Research: Chinese Bank Liquidity Risks Rising, published 21 June 2013 Applicable Criteria and Related Research: Assessing Chinese Money Market Funds - Principal Preservation and High Liquidity here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below