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Announcement:

Moody's: Most Chinese rated high-yield non-financial companies can withstand 10% RMB depreciation

 The document has been translated in other languages

21 Feb 2017

Hong Kong, February 21, 2017 -- Moody's Investors Service says 52 of the 59 high-yield non-financial companies it rates in China (Aa3 negative) could absorb the adverse effects on their leverage and interest coverage of a hypothetical 10% depreciation of the renminbi against the US dollar from the beginning of 2017 to USD/RMB7.7.

"These companies have cushion under their financial rating triggers based on our expectations for revenue and margin improvement in 2017, or sufficient mitigants in place, such as low levels of foreign currency exposure to absorb the adverse effects of such depreciation on their leverage and interest coverage," says Anthony Lee, a Moody's Analyst.

Lee was speaking on the release of a Moody's report entitled "Rated High-Yield Non-Financial Companies -- China: Most Companies Could Manage 10% RMB Depreciation vs US Dollar in 2017".

The report is an update to a report published by Moody's in August 2016, with a further hypothetical renminbi depreciation scenario. This hypothetical scenario of a depreciation of the renminbi against the US dollar is not Moody's base case scenario.

The vast majority of the 59 companies generate nearly all of their revenues in renminbi but rely on a portion of foreign currency debt, primarily the US dollar, to help fund their operations. This foreign currency debt is largely unhedged.

Of the 59 rated companies, seven are vulnerable to negative rating action under a hypothetical depreciation scenario, with five of those seven already identified in Moody's August report.

Four of these companies would breach their respective rating triggers in the hypothetical depreciation scenario: property developers Greenland Holding Group Company Limited (Ba1 negative), Country Garden Holdings Company Limited (Ba1 stable) and Shimao Property Holdings Limited (Ba2 stable), and cement producer West China Cement Limited (B1 negative).

The fifth companies, Greenland Hong Kong Holdings Limited (Ba2 negative), is vulnerable because its rating is tied to that of its parent, Greenland Holding.

Two additional companies are vulnerable to a hypothetical 10% depreciation of the RMB against the USD: Hydoo International Holding Limited (B2 negative) and United Photovoltaics Group Limited (Ba3 stable).

Finally, five companies are now less, or no longer, vulnerable to depreciation-driven rating action. These companies are Guangzhou R&F Properties Co., Ltd. (Ba3 stable), Hengdeli Holdings Limited (Ba3 review for downgrade), Central China Real Estate Limited (Ba3 stable), KWG Property Holding Limited (B1 stable) and Sunac China Holdings Limited (B2 negative).

Subscribers can access the report at:

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1056697

The report may also be found through Moody's topic page "China's Trilemma: Growth, Reform and Stability", available at http://www.moodys.com/chinarebalancing. This page provides a centralized source for Moody's research related to key credit issues in China as the country's macroeconomic story continues to unfold.

Recent Moody's publications relating to China's Trilemma include:

• Quarterly Shadow Banking Monitor

• Life Insurance -- China: Credit Profiles Under Pressure From Shifting Investment Allocation

• Renminbi Bonds Monitor: February 2017

• Inside China: January 2017

• Banking System Profile: China

• China Curtails Growth of Short-Term Savings Products, a Credit Positive for Insurers

• Insurance -- China: China's Proposal to Tighten Insurers' Shareholding Management Is Credit Positive

• State-Owned Enterprises -- China: Reform to Remain Gradual With Credit Implications Varying Across Sectors

• China Credit: Implications of Government's Plans to Reduce Corporate Leverage Are Mixed

• Banking System Outlook -- China: Deteriorating Operating Environment and Asset Quality Drive Negative Outlook

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, 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.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Anthony Lee
Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

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

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

No Related Data.
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