The total foreign currency debt devaluation affecting 180 listed companies over $ 240 billion

Updated: October 19, 2015  Views: 64

By mid-August, because the yuan against the dollar to make a one-time adjustment, Hong Kong fashion company IT (0999.HK) has therefore suffered foreign exchange losses of HK $ 60 million since early August to the end of September, the RMB against the US dollar depreciation of about 2.5 percent, whether changes in the RMB exchange rate will bring more Chinese Listed Companies risk?

'Devaluation will not bring on the debt sustainability of Chinese enterprises serious, immediate systemic risk. Limited size of China's foreign currency liabilities of non-financial enterprises, mainly in large-scale enterprises and state-owned enterprises.' International rating agency Fitch Fitch (Fitch) Senior Director Matt Jamieson said.

Fitch's recent thematic study pointed out that the vast majority of Chinese corporate debt is denominated debt in 3100 listed non-financial companies, there are only 180 carrying foreign currency liabilities, which are mainly non-RMB-denominated corporate debt issued denominated bonds or foreign currency loans, according to Bloomberg data, as of September this year, 180 Chinese companies total outstanding foreign currency loans of about $ 244 billion in total over 15 trillion US dollars of Chinese enterprises only a small total liabilities part of it. Even for those who have foreign currency liabilities of enterprises, end of last year, its foreign currency debt in its entirety is only about 30% of liabilities.

'Short term, the RMB exchange rate fell on Chinese corporate debt sustainability is very small, so far, the RMB exchange rate depreciation is small. Even after depreciation widened, still not a serious risk.' Jamieson said.

State-owned foreign debt of nearly $ 160 billion

180 held in foreign currency liabilities of Chinese listed companies, state-owned enterprises and large-scale enterprises, mostly foreign currency liabilities, non-financial listed companies in China's foreign currency liabilities, up to 81% of revenue from 200 large companies, of which the first 50 companies total debt has accounted for 52% of total foreign currency liabilities, approximately 15 percent the next 50 corporate debt accounted for.

Fitch notes that a high proportion of state-owned enterprises of foreign currency debt, foreign debt is about 60 state-owned $ 159 billion, accounting for all foreign currency liabilities ($ 244 billion) of 65%. However, these state-owned enterprises accounting for foreign currency liabilities in their total liabilities about 26.8%, compared with 120 non-state-owned 37% of the foreign currency debt ratio, at a low level.

'Foreign currency liabilities were concentrated in large enterprises and state-owned enterprises is to be expected, it is clear, large enterprises easier access to international capital markets to obtain foreign currency loans, which once again confirms our view that the devaluation of Chinese enterprises limited liability risk.' Jamieson noted Overall, the state-owned enterprises and large enterprises have a more diversified and sustainable sources of income in order to cope with changes in exchange rates led to rising costs.

Large-scale foreign currency liabilities for those companies, if further depreciation of the renminbi, may pose a risk. Fitch's statistics show that 180 listed companies from foreign currency liabilities, the 73 Company's foreign currency debt a proportion of total debt more than 50%.

'Foreign currency debt ratio and leverage double high industry or company, the most vulnerable of the RMB exchange rate changes.' Jamieson said, however, from the industry point of view, along with the two features is not much.

Foreign currency debt ratio over 70% of the industry, in general, the proportion of debt EBITDA (profit before interest, tax, depreciation and amortization) is relatively low, especially in science and technology and the automotive industry, both levers were 2.4 times and 0.7 times the contrast If the industry's leverage is high (such as more than 0.5 times), the proportion of foreign currency debt is relatively low, such as real estate (38%), natural resources (18%) Aviation (15%) and pharmaceuticals (35%) and other retail may is the highest risk industries, the proportion of foreign currency debt to 49 percent, 5.4 times leverage.

Energy, real estate, science and technology the highest foreign debt

In foreign currency liabilities divided highest scale industry, energy, real estate and technology sectors, where the energy industry 10 companies a total of $ 77 billion of foreign currency debt, and 42 real estate companies a total of $ 62 billion debt, the technology industry is saddled with 20 companies $ 30 billion debt.

In the energy sector, especially oil and gas sector foreign currency debt is absolutely the largest. Since the majority of large state-owned enterprises, the functional currency of its own, mostly dollars, its leverage is usually not high, in addition to currency conversion will result in foreign exchange losses, such enterprises are facing Currency risk is not high. real estate business is also high, although the size of foreign currency debt, but Fitch believes that exchange rate changes limited its impact, because the offshore market, the main borrowers generally have a healthy financial position, cash flow and profits. ' production capacity 'strong, able to withstand the impact of foreign exchange movements.

Although the technology industry giant foreign currency debt scale is not small, but about two-thirds of the debt from the industry's three - Ali Baba [microblogging], Tencent and Baidu [microblogging], while three have plenty of cash, a healthy cash flow and lower leverage, it will not be seriously affected.

'In the 30 largest companies in foreign currency debt, leveraged firms may be able to help identify which are hardest hit.' Jamieson said that the scale of foreign currency debt is high, but low leverage, it will not pose a risk .6 largest foreign currency liabilities of enterprises - Sinopec [microblogging], CNOOC, CNPC, China Unicom, China Overseas and Alibaba, its ratio of debt to EBITDA were lower than 3 times.

In contrast, due to the lower EBITDA and overall debt last year rose three natural resource companies - Fosun International, Hebei Iron and Steel Group and Yanzhou Coal Australia, the two real estate companies - Yuexiu KWG and Internet companies leverage Ctrip .Jamieson surpassed 10 times that if the yuan continues to depreciate, and its EBITDA to maintain or lower than the current level, the company's credit level may deteriorate.

Alibaba's foreign currency debt scale is not low. As of the end of September this year, Alibaba's foreign currency liabilities amounted to $ 8 billion, with total liabilities of the end of the scale as a reference, the proportion of foreign currency debt up to 97%. However, Jamieson believes that bring foreign exchange movements The impact is not a major credit risk Alibaba, because operating cash flow adjusted leverage is still less than 1.5 times, and free cash flow margin is positive, it is expected to continue with plenty of cash on hand.

In absolute terms, Sinopec and CNOOC, China is the largest foreign currency liabilities companies are more than 25 billion US dollars, the proportion of foreign currency debt were 47% and nearly 100%. PetroChina ranked third, $ 21 billion of foreign currency debt, foreign currency debt accounted for ratio of 25%. However, the ratio of debt to EBITDA for the three companies have less than 2 times, combined with the actual functional currency are in US dollars, lower leverage, foreign exchange risk of the three state-owned oil prices are low


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