Criat

Criat utilizes 🌟BuDA (Bottom-up Default Analysis), our automated stress testing & scenario analysis toolkit🌟, to support the assessment of the potential impact of different election outcomes on the APAC credit risk outlook. Find out more about BuDA: https://lnkd.in/dYhdAAFy Quantitative analysis relies on historical data and preset assumptions. As the impact of political events is often complex, it is impossible for quantitative analysis to precisely predict the future impacts. Yet it can still provide a forecast of future market trends and the potential extent of the impacts. This quantitative analysis focuses on the impact of macroeconomic indicators on the credit risk of financials and corporates (non-financials) in the region. Our chief economist, Dr. Zhu Yanqi, has constructed the expected macroeconomic trends in US stock market, US Treasury Bond yield, Gold Price and US Dollar under scenarios where Trump or Harris wins. In our analysis, a Republican victory may have a neutral to positive impact on the trends due to Trump's economic policy proposals, expected inflation increase. A Democratic victory may have a neutral to slightly negative impact on the trends due to the potential tax increases and stricter regulations; expected dovish stance of the Federal Reserve; potential higher fiscal spending; and other global economic conditions. We establish a connection between the changes in macroeconomic indicators and the changes in entity PD to obtain the future trend of each company’s PD. By aggregating in a bottom-up approach, we then obtain the future trend of the median PD of APAC region in different scenarios. Our analysis reveals that: ·      Short-term (by the end of 2024): Regardless of the US election outcome, the PD trend in APAC region is expected to remain consistent, with a slight increase in the next two months. We believe that the spillover effects of the US election result may only gradually emerge in 2025, so the increase in risk in 2024 is mainly attributed to the region’s own momentum effect. ·      Long-term (by the end of 2025): In the financial sector, PD shows a slow upward trend regardless of whether Trump or Harris is elected, but increase in PD is more significant under a Trump victory; in the corporate sector, a Trump victory will lead to an initial increase in PD followed by stabilization, slightly higher than the trend under a Harris victory scenario where PD increases and then decreases. ·      Although the US election has an impact on the credit risk of APAC region, the overall impact is relatively limited. Under both election scenarios, PD shows an upward trend but does not reach the highest point of PD over the past three years. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #USelection

👀 According to the International Monetary Fund, Indonesia is expected to become the world's sixth-largest economy in three years, following the United States, China, Japan, Germany, and India. The new President Prabowo stated that under his leadership, Indonesia aims to achieve an 8% economic growth target, significantly higher than the recent average growth rate of around 5%. During his ten-year presidency, the former president Jokowi led Indonesia to achieve an average annual economic growth of over 5%, with a cumulative GDP increase of 43% compared to the previous administration. In early October, at an investor summit hosted by the Bank of Indonesia, Jokowi stated in his speech that the global economic center has entered the "Asian Century," shifting from the "West" to "Asia." He predicted that three economic superpowers will emerge in Asia in the future—China, India, and Indonesia. However, he also noted that Indonesia faces many challenges in achieving its goal. 🌟 We have conducted a risk analysis of the overall Indonesian market to help investors better understand the industry risk outlook in Indonesia. We adopted a bottom-up approach, demonstrating the risk level of each industry by calculating the median PD of all companies within that industry. 🌟 We analyzed each industry from two dimensions: 1) the comparison of the industry within Indonesia to other domestic industries. 2) the comparison of the industry in Indonesia to similar industries in other ASEAN countries. In the chart below, each bubble represents an industry in Indonesia, with the size of the bubble indicating the level of PD. The x-axis represents the percentile of the industry among all 20 industries in Indonesia, and the y-axis represents the percentile of Indonesia in the industry among 7 ASEAN countries. The second quadrant shows 5 industries that perform strongly domestically in Indonesia but show some vulnerability at the ASEAN regional level: 1) Banking 2) Insurance 3) Real Estate 4) Financial Services 5) Consumer Staple Products. Notably, all financial industries (banking, insurance, and financial services) are located in the second quadrant. The domestic banking industry in Indonesia is relatively robust, with the Indonesian banking system demonstrating high resilience in the face of external shocks. Additionally, the stability of the Indonesian interbank market is attributed to strict capital entry thresholds, high capital adequacy ratios, diverse external regulatory measures, systematic crisis management agreements, and a well-established bank exit mechanism. However, compared to the banking industry in other ASEAN countries, Indonesia's market size is relatively small, and there are differences in the development of capital markets and insurance markets, resulting in a relatively high risk level in regional comparisons. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #ASEAN

On 11 Oct, Boeing announced a global layoff plan, expecting to cut about 10% of its total workforce and also revealed a delay in the rollout of the new 777X plane to 2026. Airbus also announced a layoff plan on 16 October, expecting to cut up to 2,500 positions. The reason behind this decision is the “fast-changing and very challenging business context with disrupted supply chains, rapid changes in warfare and increasing cost pressure due to budgetary constraints”. Faced with market contraction and decreased consumer demand due to the pandemic, both companies are adopting strategies such as controlling expenses, optimizing resource allocation, and strengthening technological innovation to maintain competitiveness and adapt to changes. Although we believe that these measures will have positive effects in the long term, the companies face challenges in the short term. Against the backdrop of rapidly changing market dynamics, accurate and objective risk assessment of these companies becomes particularly important for investors. 🌟 We analyzed the risks of Boeing and Airbus with Criat's Probability of Default with data-driven quantitative models🌟 ·      From January to August 2024, Boeing's PD rose from 3bps to 20bps. ·      In August 2024, Boeing's PD saw a significant jump, mainly attributed to its poor financial performance in the semi-annual report. ·      So far in 2024, Airbus's PD has remained stable, fluctuating overall below 10bps. ·      Our analysis anticipates that Boeing's PD will continue to rise in the short run primarily due to its current poor financial and stock market performance. Last Friday, Boeing also released preliminary estimated financial data for the third quarter, expecting a revenue of $17.8 billion and a GAAP loss per share of $9.97, marking the largest quarterly loss in nearly four years. It is worth noting that Boeing has taken active measures this week. Boeing plans to raise up to $25 billion by issuing stocks and bonds over the next three years to support its balance sheet. This strategic move is expected to enhance Boeing's financial flexibility and alleviate its short-term liquidity pressure. However, considering Boeing's currently weak fundamental situation, we remain cautious about the company's current credit risk outlook. ·      Our analysis anticipates Airbus's PD to slightly rise but remain relatively stable. The company achieved strong growth in 2023 and delivered more commercial aircrafts. This helped to strengthen the company's cash flow and financial stability, supporting its credit situation. However, due to factors such as the industry's inherent cyclicality, competitive pressure, geopolitical risks, and supply chain challenges, Airbus's risk profile may slightly increase as a result. #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis

We are delighted to present Criat with the highly commended award for Buy-side risk solution of the year at this year’s Asia Risk Awards. Criat stood out for their dedication in pursuing innovative and client-centric solutions around buy-side credit risk management. Through the new-gen Forward Intensity Model, Criat provides PD with top accuracy, industry-leading term structure, and interpretable insights, empowering institutions to react quickly in the dynamic market. Their solution has global application with regional nuances, in addition to exclusive flexibility for tailored implementation.   Learn more about Criat here: https://www.criat.sg/ and view the full list of Asia Risk Awards technology winners here: https://lnkd.in/gHHBrnwP

Since the end of September, a series of economic stimulus measures introduced by the Chinese government have ignited investors' enthusiasm for Chinese stocks. In a recent research report, Goldman Sachs expressed its optimistic view of the Chinese stock market and upgraded its investment rating for Chinese stocks to "overweight." However, investors have also started to focus on the potential risks lurking behind the scenes. Among the many models that discuss the relationship between stock price increases and risk, Merton's Distance to Default (DtD) model is one of the most famous ones. An increase in stock prices typically signifies an increase in the market value of a company's assets, leading to an increase in the distance to default, thereby indicating a decrease in default risk. Yet, DtD does not fully reflect the true credit risk status of a company. A firm's risk profile is also influenced by its financial health, industry characteristics, and macroeconomic environment. 🌟 Criat's PD risk model encompasses more than ten risk factors, including DtD, financial indicators, and macroeconomic indices, providing a more comprehensive analysis of a company's true credit risk profile. 🌟 The chart below shows stock price increases and PD changes for companies listed on the Shanghai and Shenzhen stock exchanges from September 24 to October 8. - Negative correlation between the rise in stock prices and PD changes: this indicates that during periods of strong stock market growth, the overall risk level of Chinese listed companies has decreased. - General market trend: The vast majority of companies (around 99.2%) experienced an increase in stock prices along with a decrease in PD. However, while stock price increases are generally associated with reduced risk, the specific extent of risk reduction needs to be precisely characterized through quantitative analysis. - Exceptional cases: Despite the overall positive trend, a small number of companies (located in the first quadrant) saw their stock prices rose, but their PD increased. This indicates that although the market as a whole is performing well, some individual companies may face specific risk challenges. 📩 For more info, message us or email enquiry@criat.sg #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #economicanalysis #China #Chineseeconomy

Rumors of a potential acquisition of Intel Corp by Qualcomm have been swirling. Under GAAP, Intel's net profit plunged into a loss of $1.6 billion. Intel’s CEO, Pat Gelsinger, candidly admitted that the company's financial performance for the quarter was "disappointing." To combat financial pressures, Intel announced a cost-cutting plan exceeding $10 billion. The following chart illustrates Intel's Criat PD series over time, showing several peaks since the beginning of this century, corresponding to the periods of the Dotcom bubble, global financial crisis, and the pandemic. The PD has continued to rise this year, reaching an all-time high, with the latest PD standing at 82.51 basis points. - Compared to its own history, Intel's current PD is 9 times the peak PD during the pandemic and 10 times the peak during the Dotcom bubble. - Compared to its peers, Intel's current PD is 91 times that of AMD and 1900 times that of NVIDIA. - Compared to benchmarks, Intel's current PD is 156 times the median PD of the NASDAQ index and 317 times the median PD of the Dow Jones index. Intel is facing the most severe challenges in its history, with a risk level far exceeding any point in its past, significantly higher than its industry peers, and markedly above market benchmarks. 📩 For more info, message us or email enquiry@criat.sg #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #federalreserve #economicanalysis

Will this Federal Reserve rate cut resemble the 2001 cycle and lead to a decrease in the level of US credit risk? The Federal Reserve announced its first rate cut in 4 years by 50 basis points. To test this hypothesis, we utilized the Criat Credit Cycle Index to review the Federal Reserve’s rate cut cycles since 2000, to help the public better understand the relationship between credit cycles and rate cuts. The chart below illustrates the five rate cut cycles since 2000: ·      January 2001 – December 2001: The Fed cut rates 11 times to offset the Dot-Com bubble burst and 9/11 attacks, both severe economic shocks. ·      November 2002 – June 2003: The Fed made 2 more cuts to support a post-bubble weak economy. ·      September 2007 – December 2008: Amid the subprime crisis and recession signs, the Fed slashed rates 10 times and initiated quantitative easing. ·      July 2019 – October 2019: The Fed preemptively cut rates 3 times amid slowing global growth and trade tensions. ·      March 2020: The COVID-19 pandemic's onset led to market turmoil and historic losses, prompting the Fed to cut rates by 150 basis points in two moves. The Criat Credit Cycle Index reveals that the Federal Reserve’s rate cut cycles do not always align with the US credit cycle. For instance, following the burst of the Dot-Com bubble at the beginning of the century, credit risk decreased after the rate cuts. However, during the financial crisis of 2008, US credit risk surged after the Fed’s rate cuts, only beginning to decline in 2009. Therefore, based on historical data, we cannot reliably predict whether U.S. credit risk will trend upwards or downwards following the current rate cut. As noted in our previous report, the risk distribution in the US exhibits a significant polarization, with some companies being exceptionally safe while others are extremely risky. These high-risk enterprises are predominantly small and medium enterprises. The Federal Reserve’s rate cuts typically have a positive impact on SMEs, especially in the short term, by reducing their financing costs and enhancing their viability and growth capacity. Consequently, we are inclined to believe that this rate cut will resemble the early-century cycle and is likely to lead to a decrease in the level of US credit risk. From a historical perspective, the US Credit Cycle Index has indeed been on the rise in recent years. As of 17 September 2024, the index stood at 30.88bps, comparable to the risk levels during the pandemic but far below the credit risk levels during the Dot-Com bubble and the subprime mortgage crisis. 📩 For more info, message us or email enquiry@criat.sg #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #federalreserve #economicanalysis

We are proud to announce that Criat has been awarded with 🌟 Highly Commended for the Buy-side risk solution of the year category for the 2024 Asia Risk Awards 🌟 for iRAP! https://lnkd.in/gHHBrnwP 🏆iRAP, intelligent Risk Analysis Platform, is our flagship product for credit risk management. Credit Risk has been a longstanding concern in financial systems. In the current credit cycle downturn, institutions face unprecedented challenges that differ from previous cycles, impacted by factors including geopolitical tensions, inflation, heightened transactional risk.   As most models used now were created over 40 years ago, buy-side institutions need a technological breakthrough to better manage credit risk. Unlike the outdated models currently dominating the market, Criat’s Forward Intensity Model was created and tested much more recently in 2009. After years of research and enhancement, iRAP is able to meet the pressing needs of buy-side institutions for credit and investment risk management.   Using our proprietary new-generation Forward Intensity Model, iRAP helps global institutions navigate in unstable market conditions and enhances effective and efficient decision-making. 🔎 Find out more here: https://www.criat.sg/irap 📩 Message or email enquiry@criat.sg for more information. This prestigious honor highlights our commitment to cutting-edge technology and client success. We are incredibly proud of our team, whose dedication and hard work made this achievement possible. A huge thank you to our clients, partners, and the wider Criat network for your trust and support. We are shaping the future of financial services together 🚀 Risk.net Business Wire Yahoo Finance Jin-Chuan Duan Miao Weimin Lichen Zhang #Fintech #CreditRiskAnalytics #Innovation #FinancialServices #Asiariskawards2024 #creditriskmanagement #riskmanagement

Will this Federal Reserve rate cut resemble the 2001 cycle and lead to a decrease in the level of US credit risk? The Federal Reserve announced its first rate cut in 4 years by 50 basis points. To test this hypothesis, we utilized the Criat Credit Cycle Index to review the Federal Reserve’s rate cut cycles since 2000, to help the public better understand the relationship between credit cycles and rate cuts. The chart below illustrates the five rate cut cycles since 2000: ·      January 2001 – December 2001: The Fed cut rates 11 times to offset the Dot-Com bubble burst and 9/11 attacks, both severe economic shocks. ·      November 2002 – June 2003: The Fed made 2 more cuts to support a post-bubble weak economy. ·      September 2007 – December 2008: Amid the subprime crisis and recession signs, the Fed slashed rates 10 times and initiated quantitative easing. ·      July 2019 – October 2019: The Fed preemptively cut rates 3 times amid slowing global growth and trade tensions. ·      March 2020: The COVID-19 pandemic's onset led to market turmoil and historic losses, prompting the Fed to cut rates by 150 basis points in two moves. The Criat Credit Cycle Index reveals that the Federal Reserve’s rate cut cycles do not always align with the US credit cycle. For instance, following the burst of the Dot-Com bubble at the beginning of the century, credit risk decreased after the rate cuts. However, during the financial crisis of 2008, US credit risk surged after the Fed’s rate cuts, only beginning to decline in 2009. Therefore, based on historical data, we cannot reliably predict whether U.S. credit risk will trend upwards or downwards following the current rate cut. As noted in our previous report, the risk distribution in the US exhibits a significant polarization, with some companies being exceptionally safe while others are extremely risky. These high-risk enterprises are predominantly small and medium enterprises. The Federal Reserve’s rate cuts typically have a positive impact on SMEs, especially in the short term, by reducing their financing costs and enhancing their viability and growth capacity. Consequently, we are inclined to believe that this rate cut will resemble the early-century cycle and is likely to lead to a decrease in the level of US credit risk. From a historical perspective, the US Credit Cycle Index has indeed been on the rise in recent years. As of 17 September 2024, the index stood at 30.88bps, comparable to the risk levels during the pandemic but far below the credit risk levels during the Dot-Com bubble and the subprime mortgage crisis. 📩 For more info, message us or email enquiry@criat.sg #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics #federalreserve #economicanalysis

🔎 In the 2nd half of 2024, what is the risk outlook of the top 5 largest economies in the world? US, China, Germany, Japan, and India continue to hold the top 5 positions in terms of GDP. In this global economic competition, the US has demonstrated a relatively strong growth momentum, with a 3.0% increase in the first half of the year. China, the second-largest economy globally, saw a 5.0% year-on-year increase in GDP in the first half. India’s economic performance is particularly impressive, with a growth rate as high as 7.2% in the first half of the year. The German economy contracted by 0.2% year-on-year in the first half. However, thanks to the dual impact of the appreciation of the euro and inflation, the GDP calculated in US dollars actually increased. Japan’s economic performance is even more subdued, with the economy contracting by 0.9% year-on-year in the first half, falling to $1.96 trillion. 💡 Looking ahead to the second half of the year, Criat has conducted an in-depth analysis of the risk conditions of the five major economies to provide a new perspective to understand the risk positioning of different countries in the global landscape. 💡 In the chart below, the x-axis represents the percentiles of PD for all companies in each country, and the y-axis shows the global position corresponding to the country’s percentile. By interpreting these data, we have drawn the following insights: ·        The risk distribution in US shows a significant differentiation. The 50th percentile of US roughly corresponds to the global 50th percentile, but its 25th percentile only corresponds to the global 20th percentile, and the 75th percentile reaches as high as the global 90th percentile. This indicates that there is a great difference in the PD of US companies, with safe companies being exceptionally safe and risky ones being extremely dangerous. ·        China’s overall risk level is relatively high. However, it is worth noting there are few extremely dangerous companies in China, while there are no particular safe companies either. ·        The risk distribution of Germany and India does not show significant differences compared to the global market. ·        Japan’s risk situation is surprisingly good. It’s 75th percentile only corresponds to the global 30th percentile, which means that even if a company is ranked in the 25th percentile in Japan, its safety level is far higher than 70% of companies globally. Financial Times Nikkei Asia Reuters The Wall Street Journal Bloomberg The Australian Financial Review The Business Times #financialtechnology #innovation #investmentmanagement #creditrisk #creditanalytics