Credit fundamentals for most Chinese corporate sectors in Fitch’s rated portfolio have improved after China’s economy re-opened in late-2022, says Fitch Ratings in a new report. Consumer-related sectors have seen the most positive rating actions since the beginning of 2023 amid a recovery in consumption of offline services and operational normalisation.
Fitch expects rated Chinese corporates’ aggregate revenue and EBITDA to grow moderately by 1.4% and 4.8%, respectively, in 2023 as downstream-oriented companies’ profit growth from the consumption-led recovery is offset by upstream companies’ declining profits due to lower commodity prices. The strength of China’s economic recovery has also tapered off since 2Q23, as consumer sentiment remains weak and the recovery in property sales stalled. As a result, rated corporates’ aggregate EBITDA margin will only expand modestly by around 40bp yoy to 13.0% in 2023.
We expect rated corporates’ capex to increase slightly faster by 6% in 2023 compared with 5% in 2022, driven by consumption-related companies’ normalisation in spending, diversified manufacturing companies’ investments in emerging sectors, and utilities’ continued execution of energy transition strategies. The moderate pace of expansion as well as key capex spenders’ strong internal cash generation and access to equity funding suggest that the rated corporates’ aggregate EBITDA net leverage is likely to stay stable in 2023.
The number of positive rating actions outnumbered negative rating actions in the year to date, reflecting better credit fundamentals for Fitch’s rated portfolio. The property sector dominated negative rating actions as the funding environment remained challenging for private enterprises and the recovery in property sales has stalled.
Source: Hellenic Shipping News
