China: S&P’s (Expected) Downgrade - Reality Bites

Monitor: Moody’s Downgrade on China Is the First Domino to Fall). The outlook was revised to stable from negative.

We reiterate our Neutral recommendation on China's USD bond universe as our outlook on China has not changed and S&P's downgrade is within our expectation. Though we believe the market has already anticipated the downgrade, the knee-jerk reaction from the downgrade itself and more downgrades on the entities, closely-related to the government, could produce buying opportunities. We would generally avoid Chinese credits without implicit or explicit support from the government.

Back in May, we predicted the following:

China's worsening...

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