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Announcement:

Moody's: Credit trends of Chinese corporates to stabilize

 The document has been translated in other languages

Global Credit Research - 19 Mar 2013

Beijing, March 19, 2013 -- Moody's Investors Service says that credit trends for Chinese corporates are likely to stabilize in 2013 because of the improvement in the domestic economy and the continuation of a benign liquidity environment.

"We expect to take fewer negative rating actions on Chinese companies in 2013 than in 2012, as the revenues and earnings of most firms will recover. This view is based on expectations for gradual improvements in the fundamentals of some industry sectors, against the backdrop of our central macroeconomic scenario," says Kai Hu, a Moody's Vice President and Senior Analyst.

According to the report, Moody's central macroeconomic scenario now forecasts GDP growth for China at the current level of 7.5%-8.5% in 2013, up by 0.5 percentage point from our previous forecast, and in the range of 7.0%-8.0% in 2014.

"In addition, the liquidity environment will, as indicated, remain favorable, thereby supporting the refinancing and investment needs of rated Chinese companies," he adds.

Hu was speaking on a just-released Moody's report titled, "Chinese Corporate Credit Trends to Stabilize on Improving Economy." He is the lead author of the report.

Increased state-directed investments in infrastructure and the stabilization of the property market have boosted the economic recovery in the Mainland and have helped offset weak growth in exports.

These two factors will remain the major drivers of growth in 2013, directly benefiting companies in related sectors, such as property, steel, building materials and construction.

Issuers in these sectors -- which faced the bulk of Moody's negative rating actions on Chinese firms in 2012-- will see their revenues and earnings recover from the lows in seen 2012.

The government's expansionary fiscal policies and its continued efforts to expand urbanization will also fuel spending on infrastructure. At the same time, Moody's expects property sales to grow in single-digit percentage terms in China, as developers shift towards mass-market housing to meet increasing demand.

Companies in the steel, building materials and construction sectors, which derive a high proportion of their revenues from infrastructure projects and property construction, will see a modest improvement in their revenues and earnings in 2013, although their financials will remain weak.

In addition, the increase in demand for construction-related commodities, such as steel and cement, will alleviate the pressure on selling prices and, in turn, lift the profit margins of those issuers exposed to this segment. The recovery will, however, be limited by lingering overcapacity problems in these sectors.

Moody's also expects energy consumption in China to increase from 2012 levels, driven by the rebound in industrial output.

"The positive impact of the modest growth in property sales and higher infrastructure investment will filter down to energy-related industries, such as oil & gas, power utilities and mining," says Hu.

Furthermore, a steady increase in domestic consumption will support sectors such as retail, consumer goods, TMT (telecom, media and technology) and autos.

The report also notes that investment-grade companies -- mainly comprising state-owned enterprises -- will continue to enjoy favorable access to the bank loans and capital markets, while the refinancing risk for high-yield companies will remain manageable through to 2016.

Nevertheless, many Chinese issuers share some broad risks in the near-to-medium term. These include: (1) generally weak liquidity management and asset-liability structures, weak corporate governance, and low transparency; (2) challenges and uncertainties associated with the reform and rebalancing of the Chinese economy; and (3) shifts in the global competitiveness of Chinese manufacturers as both wages and skills increase.

Subscribers can access the report at http://www.moodys.com/research/Chinese-Corporate-Credit-Trends-to-Stabilize-on-Improving-Economy--PBC_151487

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Kai Hu
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service (Beijing) Ltd.
10th Floor, International Financial Centre D
No. 156, Fuxingmen Nei Street
Beijing 100031
P.R. China
Telephone:+86-10 6319-6500

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service (Beijing) Ltd.
10th Floor, International Financial Centre C
No. 156, Fuxingmen Nei Street
Beijing 100031
P.R. China
Telephone:+86-10 6642 8968

Moody's: Credit trends of Chinese corporates to stabilize
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


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© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
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