Outlook for Chinese corporates stable in 2019 - Moody's

    Moody's Investors Service says the outlook for Chinese non-financial corporates remains broadly stable for 2019, supported by expected GDP growth of 6%.
  "However, slowing economic growth, tighter funding conditions and the potential for a further escalation of US-China trade tensions will create challenges," says Lina Choi, a Moody's Vice President and Senior Credit Officer.
  Moody's expect China's GDP growth will slow to 6% in 2019 from its expectation of 6.6% in 2018. 
  The slower, albeit still solid, economic growth will limit corporates' earnings growth and will impact sectors in different ways.
  One of the primary outcomes is that broad deleveraging in the state-owned sector will likely slow or stall, despite the government's initiatives to reduce debt. 
  "We also expect funding conditions will remain challenging for high-yield companies and financing costs will rise," said Choi.
  However, bonds issued from the onshore account for around 63% of rated companies' bond maturities through 2022, and Moody's expects that the onshore markets will remain supportive for most rated companies.
  "A further negative impact on the outlook could also come from a significant escalation of US-China trade tensions," said Choi.
  In Moody's base case, the US-China trade tensions will have a limited direct effect on rated companies. However, a further escalation of trade tensions could have broader implications, including a weakening of investment trends and consumer confidence.
  Moody's conclusions are contained in its just-released report, "Non-financial corporates -- China: 2019 Outlook".
  Some large sectors, such as oil and gas, chemicals and steel, dominated by state-owned enterprises (SOEs), are unlikely to see revenue or earnings growth due to the growth slowdown.
  Others, such as metals and mining, will see small declines as some commodity prices stay flat or decline and costs increase. Likewise, Moody's expects declines in nationwide sales for the property sector of around 5%.
  On the other hand, other SOE-dominated sectors such as construction will continue to see solid earnings growth off the back of ongoing infrastructure development.
  And some other sectors -- consisting of more private sector entities - such as food and beverages will grow on average in the mid- to high-single-digit levels. The internet sector will continue to grow strongly, albeit down from previous years.