Fierce competition to cut margins for Greater China consumer sector: S&P

HONG KONG - Tight margins are likely to plague Greater China's consumer products, gaming, retail, and telecommunications sectors as competition heats up further, according to ratings agency Standard & Poor’s, which believes China's retail sector is likely to struggle as industry rivalry ramps up, forcing companies to chalk up large marketing costs and to expand aggressively.

S&P credit analyst Lillian Chiou says: "Rating pressure on this sector is negative, particularly for the department stores that we rate."

On the other hand, consumer product, gaming, and telecommunications companies in Greater China (China, Hong Kong, and Macau) face neutral-to-upward rating pressure, she adds. Nevertheless, all three sectors and retail are facing subdued consumer sentiment and declining revenue prospects.

“We tracked the 2015 financial performance of 14 companies that we rate in
Greater China's consumer product, gaming, retail, and telecommunications sectors against our latest base-case assumptions,” she says.

“The analysis indicates the likely rating pressure on the companies based on their financial performance in 2015 compared to our base-case forecasts.” www.standardandpoors.com (ATI).