There is a problem with the political credit products of the provincial capital, what is the meaning behind it?
Recently, there was a problem with a political credit project in Lanzhou, why would this product be talked about separately?It is because their financiers and guarantors are relatively strong, and they are all urban investment platforms of prefecture-level cities, and the guarantors are the top three local urban investment platforms, but there are still problems with this seemingly strong structural product.
What does this mean?This represents that their overall refinancing ability is already weak.
Generally speaking, the political credit project of the provincial capital city does not represent the strength of their city, but the strength of the entire province. If there is a problem with such a product, then their ability to refinance the entire region will be greatly affected. That's why I often tell investors that the first thing we look at when choosing a project is the regional economy, and if this is not good, then no matter how good the product is, we must be cautious.
Because where the regional economy is good, their refinancing ability will be stronger, their political and economic environment will be more stable, and they also have high development potential and growth space. This will be helpful for investors who want to obtain stable investment returns in the long run. Sometimes investors will also ask me, if it is a standard bond for urban investment in a weak area and a non-standard political credit in a high-quality area, then how should I choose when all other conditions are exactly the same?I generally recommend choosing non-standard political letters in high-quality areas, in fact, this is to put the regional economy first.
I will often talk about why you should choose a good regional economy, because if the economy is good, then their ability to repay debts will be strong. In fact, for this kind of political and credit projects, all localities have a relatively strong willingness to repay, and generally will not delay and withhold. Because there is a problem, it will affect their reputation, which will increase their financing cost and financing difficulty in the later stage. Therefore, everyone has the willingness to repay, but the willingness to repay and the ability to repay are two concepts.
For weak economic regions, it is not meaningful to have the willingness to repay but not the ability to repay, because it will be more likely to have problems in the end. But for the good places in the economic region, it is different, they not only have the willingness to repay, but also the ability to repay, which is definitely the preferred choice for investors.
Of course, it is still necessary to remind this kind of product of perpetual bonds, because the structure of this product is very unfriendly to investors, because from a legal perspective, they do not repay and do not pay interest is not considered a default, if you are a company and only have a sum of money, one is considered a default if you do not repay, and one does not repay is not considered a default, who will you give it to first?
Therefore, I have always not recommended investors to choose this kind of product. Especially in some areas of Jiangsu and Zhejiang, this kind of product is almost the same as Chinese cabbage, so it has always been recommended to be cautious. In addition to looking at the regional economy, we still need to look at the counterparty and the transaction structure, because these two also have a relatively large impact on the project. If you have anything unclear, you can send me a private message, and we will reply to you as soon as possible, I am Liu sir, follow me, and help you avoid more market risks.