Ratings upgrades for Greater China
Standard & Poor's cites the mainland's growth as the most positive factor
Overall corporate credit quality in China, Hong Kong and Taiwan has improved from seven months ago, according to Standard & Poor's, which cited the boisterous economy on the mainland as the most important positive factor.
In its biannual corporate report card for Greater China released yesterday, the ratings agency issued no downgrades. It upgraded the credit ratings of four mainland companies and revised the outlook of three regional firms to 'positive' from 'stable'. Five companies, including two Hong Kong property firms, saw their outlook revised to 'stable' from 'negative'.
'China has led the way in the current recovery highlighted by the upgrade of the sovereign credit in February 2004,' John Bailey, a credit analyst at Standard & Poor's in Hong Kong, wrote in a statement yesterday.
The February upgrade of the mainland's short and long-term foreign-currency ratings to BBB+/A2 supported ratings upgrades of China Mobile (Hong Kong), China National Offshore Oil Corp, CNOOC and Huaneng Power International.
'Similarly, the outlook on Hong Kong's economy is much brighter than in the past,' Mr Bailey said.
S&P revised the outlook for two Hong Kong property firms to stable from negative: Sun Hung Kai Properties, thanks to improved operating performance, and Swire Pacific, due to a rebound in aviation and a solid performance in real estate.
'With an upturn in property prices, developers are now starting to improve their credit-protection measures,' the report said.
However, it added that 'weak performances by property investors, which continue to experience negative rental reversions, remain a negative factor'.
'In China, the main challenge will be to slow the economy so that it does not overheat,' the report noted. 'Some sectors of the economy, such as steel, autos, aluminium and property, are exposed to overcapacity.'
The ratings agency noted growth in industrial production in Taiwan, with the semiconductor sector posting a 'sustained increase in sales', but warned that political instability could have an economic impact.
'If the global economy continues to perform well and regional politics stays calm, more positive rating actions are likely,' it said.
