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TEXT-Fitch: Marginal Earnings Upside for China's FAI-Related Industries
(The following was released by the rating agency)
Link to Fitch Ratings' Report: 2013 Outlook: China Fixed-Asset Investment
SINGAPORE/HONG KONG, January 30 (Fitch) Fitch Ratings says in a new report that it expects a firmer economic outlook for China in 2013 to only marginally improve the operating environment of fixed asset investment (FAI)-related sectors. This is because a protracted period of industry restructuring to address excess production capacity is essential to enhance the longer-term outlook.
Specific product classes - concrete, rebar, light rail steel - that benefit from urbanisation may continue to perform well while slower industrial production capacity growth may constrain the performance of companies in the heavy industry sector.
The report also highlights that global demand changes may complicate the operating environment, putting cost and pricing pressure on an already thin profit margin. Another risk is that a rapid pace of industry consolidation driven by the state may hurt corporate balance sheets as few companies have the financial resources and operational breadth to undertake M&A large enough to materially affect the industry competition structure.
Currently Fitch rates the following companies:
Aluminum Corporation of China Limited ('BBB+'/Stable)
Baosteel Group Corporation ('A-'/Stable)
China Hanking Holdings Limited ('BB-'/Stable)
China Hongqiao Group Limited ('BB'/Positive)
China Liansu Group Holdings Limited ('BB'/Stable)
China Oriental Group Company Limited ('BB+'/Negative)
China Shanshui Cement Group Limited ('BB-'/Positive)
Delong Holdings Limited ('B'/Negative)
West China Cement Limited ('BB-'/Stable)
Winsway Coking Coal Holdings Limited ('BB-'/Negative)
Zoomlion Heavy Industry Science and Technology Co. Ltd ('BBB-'/Stable)
The report, '2013: China Fixed-Asset Investment', is available on www.fitchratings.com or by clicking on the link above.
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