Towards a Better Global Credit Rating

Since May when we blogged on the Illusion of Global Investment Risk, we have been looking for Credit Rating agencies that will possibly give a challenge to the trio of Fitch, S&P and Moody’s. Together, these agencies facilitated the global economic crises through allocation of ratings that are dubious to securities and sovereign debts. We were worried that pragmatic nations like Botswana and South Africa will have the same ratings as Greece which was basically bankrupt.


But good enough, the Chinese are in town and something good is going to happen in the rating industry.  Dagong Global Credit Rating just published their first report on international sovereign debt and the numbers made sense. In its July 11, 2010 report, it correctly put China ahead of US, UK and Japan in credit rating.


Though the big three will contest that, we think Dagong is in line with what we have been asking in our blogs. The risk profiles of nations have evolved and must follow the new realities of the 21st century. The big three are doing nothing but awarding numbers based on ideology and beliefs, especially punishing emerging economies that are driving the global recovery without any major reason than subjectivities and perceptions that have been built for decades.


The changes from these nations are not recognized.  That is why South Africa may be a bad place to do business than Greece.  So at the end, these developing nations suffer through higher interests when they seek funds in the market because of the numbers the big three have assigned to them.


Instead of looking at economics, they focus on politics and per capital GDP which though important miss important points. Dagong comes out with what we think and have advocated in our blogs. Looking beyond the old perceptions and measuring realities. Dagong focuses on wealth creation ability, foreign currency reserves and fiscal health. In the mix of these three categories, China beats US, Japan and UK and certainly deserves better ratings. So, we agree with Dagong.


We congratulate Dagong and hope that SEC will approve and recognize them as accredited rating agency in the US. It will be a media war as the big three will not fade easily. We see the progress made in most African nations captioned by Dagong than the big three. We want cheaper sources of funds for our growths and we welcome Dagong.


original pub – Aug 2010. Just if you missed it in the other retired blog

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