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Xinhua Far East Announces Industry Report on China's
Petrochemical Sector
HONG KONG, Sept. 15 /Xinhua-PRNewswire-FirstCall/ -- Xinhua Far East China
Ratings (Xinhua Far East), the pioneering venture ranking credit risk among
Chinese corporations using international standards, today published an industry
research report on China's petrochemical sector, entitled "Big is beautiful --
to succeed is to be a big boy of a big parent on big turf," incorporating its
annual review of issuer credit ratings of China's key petrochemical companies,
all of which are subsidiaries or associated companies of China Petroleum and
Chemical Corporations ("Sinopec," Xinhua Far East issuer credit rating AA+
(pi), NYSE: SNP, HKEx: 0386, SH A: 600028).
In addition to assigning issuer credit ratings on more than 100 of China's
corporations based on international standards, Xinhua Far East engages in
investment and industrial research that provides an unparalleled insight and
outlook into key industries in China, assisting investors to unravel China's
evolving dynamics and uncover investment opportunities in its various sectors.
In the coming months, Xinhua Far East will publish a sector review on the oil &
gas, utilities, telecoms and steel sectors, as well as investment commentaries
on China.
In Xinhua Far East's opinion, domestic petrochemical makers are in a blessed
position to mitigate against the overcapacity and price volatilities affecting
global markets because of the tremendous growth potential offered by the sheer
magnitude of China's domestic market and the prevailing low per capital usage
of petrochemical products. The vibrant outlook for the industry is a key
factor supporting the upgrade of some rated companies in the latest annual
sector review by Xinhua Far East. Moreover, Xinhua Far East believes the
uptrend in China's petrochemical sector profitability will continue, although
competition among petrochemical producers would intensify following execution
of China's WTO commitments.
However, despite favourable operating conditions at home and a turnaround in
global market prices since 2003, the profitability of domestic players still
lags behind their international rivals. The legacy of China's planned economy
era has resulted in a fragmented industry, hindering domestic companies from
achieving economies of scale. Consequently, the relatively small operating
scales and lagging technology have caused lower gross margins compared to
international peers.
Nevertheless, the support from Sinopec provides solid credit enhancement to the
issuer ratings of individual petrochemical companies, most of which are not
very strong on a stand-alone basis. Sinopec is the largest vertically
integrated oil company in China and all its petrochemical subsidiaries are
effectively various layers in a multi-layer production chain, converting crude
oil into refined petroleum products (e.g. gasoline and naphtha), then into
intermediate petrochemical products, and then into synthetic petrochemical
products (e.g. resins). Being part of Sinopec's vertically integrated
production chain family offers the individual petrochemical subsidiaries a
steady flow of feedstock and demand for finished products. It also gives
certain insulation against price and market volatilities inherent in various
petrochemical product segments. Moreover, these petrochemical companies can
benefit from additional financial support from their parent to fund their
substantial capital expenditure used for upgrading and expanding production.
Going forward, Xinhua Far East expects the rating variations among each
petrochemical company to increase, with their outlook dependent on how
successfully they can leverage their support from Sinopec to build up to their
optimal operating scales, enhance their competitiveness and grasp hold of the
growth opportunities offered within China. In particular, Xinhua Far East
notes that various Sinopec subsidiaries have formed joint ventures with global
giants, such as BP, BASF, and Exxon Mobil to build new production facilities.
These begin to offer more direct competition between Sinopec's various family
members.
A summary of the annual review on Xinhua Far East-rated petrochemical companies
is shown in the following table:
Companies Rating Action Initial Rating
Assignment
Sinopec Confirmed AA+ AA+(pi)
(NYSE SNP; HKEx 0386; (pi) rating since June
SH A 600028) 2003
Shanghai Petrochemical First rating September
(NYSE SHI; HKEx 0338; assignment 2004
SH A 600688) BBB+ (pi)
Sinopec Yangzi Rating is BBB- (pi)
(SZ A 000866) upgraded to since April
BBB(pi) 2003
Sinopec Qilu Rating is BB (pi) since
(SH A 600002) upgraded to January 2003
BBB(pi)
Sinopec Yizheng Confirmed BBB- BBB- (pi)
(HKEx 1033; SH A 600871) (pi) rating since April
2003
Sinopec Beijing Yanhua Rating is BB (pi) since
(NYSE BYH; HKEx 0325) upgraded to January 2003
BB+(pi)
For a copy of summary of review report and ratings, please visit our
http://website:www.xinhuafinance.com/creditrating .
Note to Editors:
About Xinhua Far East China Ratings
Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in
China that aims to rank credit risks among corporations in China. It is
engineered by the strategic alliance between Xinhua Financial Network and
Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua
Finance company in 2003 and the first China member of The Association of Credit
Rating Agencies in Asia in December 2003.
Capitalizing on the synergy between Xinhua Financial Network and Shanghai Far
East, Xinhua Far East's rating methodology and process blend unique local
market knowledge with international rating standards. Xinhua Far East is
committed to provide investors with independent, objective, timely and forward
looking credit opinions on Chinese companies. It aims at helping investors
differentiate the credit risks among the corporations in China, thereby,
cultivating their awareness and promoting information disclosures and
transparency in China market. For more information, see
http://www.xinhuafinance.com/creditrating .
About Xinhua Finance Limited
Xinhua Finance is an independent financial information and services company
providing financial news and information, as well as a broad array of financial
products and services unique to the China markets. Xinhua Finance provides
real time coverage of Chinese and Asian equity markets, delivering an
integrated platform of China-specific indices, financial news feeds, credit
ratings, and investor relations services to global financial institutions and
re-distributors via leased line, internet, and satellite technology.
Founded in 1999, Xinhua Finance is owned by a group of international
shareholders and managed by a team of experienced business professionals
recognized for their industry knowledge and pioneering role in accelerating
efficiencies and transparency within China's rapidly expanding capital markets.
Headquartered in Hong Kong, Xinhua Finance has offices in Beijing, Shanghai,
Shenzhen, Seoul, Taipei, Tokyo, Singapore, and New York. For more information,
see http://www.xinhuafinance.com/ .
About Shanghai Far East Credit Rating Co., Ltd
Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional
credit rating company with comprehensive business coverage in China. It is an
independent agency established by the Shanghai Academy of Social Sciences with
the mission to develop internationally accepted standards of capital market in
China. The company is a pioneer to conduct bond-rating business in China. For
years, it has been recognized by the Shanghai branch of the PBOC to do loan
certificate credit rating.
Since establishment, it had rated over 1,000 corporate long-term bonds and
commercial papers, based on the principles of objectivity, fairness and
independence. The company has also maintained over 50% market share in the
loan certificate-rating sector in Shanghai for three consecutive years. With
its strong local presence and knowledge, it provides investors the most
insightful and unique credit opinion. For more information, see
http://www.fareast-cr.com/ .
For more information, please contact:
Ms Joy Tsang of Xinhua Finance
Tel: +852-3196-3983 or +852-9486-4364
Email:
PR Contacts in the US:
Mr. Jason Rando of The Ruth Group
Tel: +1-646-536-7025
Email:
Gregory Tiberend of The Ruth Group
Tel: +1-646-536-7005
Email:
Websites: http://www.xinhuafinance.com
http://www.fareast-cr.com
http://www.xinhuafinance.com/creditrating
http://www.xinhuaftse.com
DATASOURCE: Xinhua Far East China Ratings
CONTACT: Joy Tsang of Xinhua Finance, +852-3196-3983 or +852-9486-4364;
Jason Rando, +1-646-536-7025 or , Gregory Tiberend,
+1-646-536-7005 or , both of the Ruth Group for
Xinhua