Monthly Report on Credit Risk Trends of Chinese Listed Companies – September 2022

In August, the overall market-implied risk declined by a substantial 20% across all sectors. Communications Services, Information Technology and Consumer Staples represent some of the sectors witnessing the steepest decline in risk, having been on a downward trend since June. Information Technology and Industrials are amongst those recording a monthly risk decline in excess of 20% for three consecutive months. Overall, after peaking in May this year, the risk levels of all sectors have been declining materially as the pandemic eased, with current absolute levels of risk now similar to those that were prevailing at the beginning of the year.

Key highlights:

• Looking at August’s risk rankings, sectors at the top included Information Technology, Health Care and Consumer Staples while Energy, Real Estate and Consumer Discretionary remained at the bottom.
• The increase in risks experienced by the Real Estate and Financials sectors is closely related to the macroeconomic environment, with the median market-implied risk of the Real Estate sector rising from 0.79% in January to 1.32% in August, and that of the later rising from 0.35% to 1.09% over the same period.