Fitch: Credit Risk Of iTraxx Asia Ex-Japan Series 7 Index Is Broadly Stable
Fitch Ratings has today said the credit risk of the overall iTraxx Asia ex-Japan Series 7 credit default swap (CDS) index remains broadly stable, following the recent rollover from Series 6. The weighted average rating has remained the same (’BBB’/'BBB-’(BBB minus) in Series 7, although the weighted average rating factor has deteriorated slightly to 5.30 from 5.06 in Series 6.
The agency notes that the rating migration of some individual constituents as well as the substitutions effected by the new roll, is reflected in the credit assessment of ‘A+’ given to the 9%-12% tranche in Series 7, compared with ‘AA-’ (AA minus) in Series 6. The number of reference entities that are rated below investment-grade increased to 11 in Series 7 from six in Series 6. Apart from the 9%-12% tranche, the ratings of all the remaining tranches remain the same, compared to those of Series 6. Comprising 50 reference entities, the iTraxx Asia ex-Japan Series 7 index allows investors to gain credit exposure to the 50 most liquid CDS in non-Japan Asia. This roll was effective on 20 March 2007, with a 5.25 year maturity on 20 June 2012. Fitch has provided credit assessments for each tranche of the index. The top three industry concentrations in the iTraxx Asia ex-Japan Series 7 index are: banking & finance (24%), sovereigns (14%) and telecommunications (12%). There are 11 sub-investment grade reference entities on the portfolio. The agency notes that three reference entities from Series 6 have been removed and another three reference entities added in Series 7 to reflect recent dealer liquidity polls, as detailed below.