FINANCIAL INSTITUTIONSISSUER COMMENT 23 JUNE 2015CHINA CONSTRUCTION BANK CORP (SHG)Moodys Senior Unsecured Rating A1Moodys Outlook STABond-Implied Rating NACDS-Implied Rating Baa3EDF-Implied Rating Ba3As of 6/22/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewChina Construction Bank: Two Market-Implied Ratings Rally Both the CDS- and EDF-implied ratings for China Construction Bank rose from their levels of one year ago. According to Moodys Bank Financial Metrics, China Construction Bank is one of the ten largest banks in the world, ranked by assets, which are $2.7 trillion (see Appendix 1, below).FIGURE 1. CHINA CONSTRUCTION BANK: MOODYS AND MARKET-IMPLIED RATINGS, LAST 365 DAYS (DAILY DATA)Twelve months ago the banks CDS-implied rating was Ba1. It has now advanced by one notch to Baa3.(Figure 1). The EDF'-implied rating climbed by three notches from B3 to Ba3. (We do not publish a bond-implied rating for China Construction Bank because none of its debt securities fit our model.)MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 23 JUNE 2015 MARKET SIGNALS REVIEW : CHINA CONSTRUCTION BANK: TWO MARKET-IMPLIED RATINGS RALLYAccording to our ratings gap-conditioned transition matrices, companies rated A1 with a CDS-implied rating of Baa3 outperformed the broad market 42% of the time over the following 12 months, matched the markets performance 27% of the time, and underperformed the broad market 29% of the time.China Construction Banks CDS-implied ratings gap is now -5 notches, a one notch gain from 12 months ago (Figure 2). The EDF-implied ratings gap improved over the year from -11 notches to -8 notches.Readers will recall that when a market-implied rating rises, the underlying securities have outperfor...
