Shanghai - Credit analysts have jumped to the top of Chinese headhunters’ most-wanted list after at least seven companies defaulted in 2015, up from only one in the years since the onshore bond market started in 1981.
“We haven’t seen so much demand for credit analysts before,” said Monica Song, associate director for China financial services at human resources company Hudson Global Inc. in Shanghai. “Brokerages’ asset management departments, mutual funds and insurance companies are the biggest recruiters.”
Shanghai-based HFT Investment Management , which oversees 68.6 billion yuan ($10.6 billion) of fixed-income assets, said in an interview on December 8 that it will expand its credit analyst team by as much as 50 percent in three years and such specialists’ pay will likely increase. Franklin Templeton Investment’s joint venture in China said it is recruiting a researcher with credit analysis experience. The most recent default was by Sichuan Shengda Group earlier in December and Ordos City Huayan Investment Group has flagged a possible delinquency this week.
Fund managers need to be especially vigilant as the debt-rating industry faces teething trouble. China Chengxin International Credit Rating didn’t cut China Shanshui Cement Group’s score to a level considered junk until just two days before the cement maker warned on November 5 of a possible default. UBS said there will be stronger demand for onshore credit analysts as the market matures and global investors are allowed into the third-biggest bond market. CSOP Asset Management, which has the world’s biggest fixed-income exchange-traded fund investing offshore yuan on the mainland, is recruiting in Hong Kong.
Rising risks
“We are looking for more talent to look at the onshore fixed-income space because the onshore bond market is developing very fast and we are looking to offer more products,” said Melody He, head of capital markets at CSOP, whose ETF has 2.5 billion yuan in assets.
Some investors have stepped on mines as defaults spread. Fullgoal Fund Management, holder of China Shanshui Cement’s defaulted bonds, has filed a lawsuit against the company, the mutual fund said in a statement on its website.
“Downward pressure on the economy is rising and so are credit risks,” said Diao Huiyu, the head of fixed-income investment in Shanghai at Franklin Templeton Sealand Fund Management, which has about 11.6 billion yuan of assets under management.
The extra yield on five-year AA- rated corporate bonds over similar-maturity government notes has dropped 19.6 basis points this month to 185.5, after rising 19 basis points in November, the most this year. HFT’s Shao said the number of defaults will rise in 2016 and the correction in lower-rated notes may last for another one to two months because investors have realised the government won’t bail out every troubled company.
Ordos City Huayan, based in the northern region of Inner Mongolia, said uncertainty arose after bondholders opted for early redemption of 1.14 billion yuan of notes on December 17, according to a statement on the Chinabond website Friday.
When trying to lure talent from other companies, some investment firms offer to pay more than 20 percent of their previous salary, said Hudson’s Song. For current credit analysts at asset management firms, pay increases should be more than the average for all the staff because of investors’ increasing emphasis on their work, HFT’s Shao said.
“It’s a competitive industry,” said Shao. “China is short of excellent credit analysts. There are not many people who have their own views and a deep understanding of Chinese companies. We are also recruiting people, but it will take time.”
Premier Li Keqiang has pledged to weed out zombie companies and close manufacturers with overcapacity even as the economy grows at the slowest pace in a quarter century.
“In the past, Chinese investors didn’t care about credit research and risk control,” said Zhai Chenxi, vice president at TF Securities Co. in Beijing. “The market is short of experienced credit analysts. As Chinese bonds’ credit risks rise higher and higher, demand for such talents will be bigger and bigger.”
-With assistance from Xize Kang, Yuanting Yin and Heng Xie.
BLOOMBERG