Bangkok--25 Jun--Moody's
Moody's Investors Service is retaining a stable rating outlook for Asia Pacific's retailing and consumer product sectors over the next 12-18 months despite continued economic uncertainty in the region and worldwide.
In a new report, Moody's says that record-level stimulus plans and the easing of interest rates by Asia-Pacific policymakers have propped up domestic demand. The rating agency expects renewed growth to be supported by local consumers rather than from the export markets that had propelled the region in recent years.
One of the report's authors, Ian Lewis, a Moody's vice president and senior analyst, says, "With rising unemployment, low consumer confidence, and diminished wealth from lower asset values in much of the region, non-discretionary consumption on basic consumer products is likely to hold up better than discretionary expenditures on premium goods at retail outlets."
Lewis adds, "Suppliers and retailers of staple consumer products such as supermarkets, hypermarkets, and beverage companies are better able to withstand a slump in overall demand than high-end retailers or department stores." Lewis also notes that "Increasingly thrifty consumers are shifting to more economical items, as retailers are successfully marketing lower-cost, but higher-margin, own-label store brands over specialty and known-brand items."
A second author, Chris Park, a Moody's vice president and senior analyst, says, "A number of our rated issuers have raised equity to strengthen their balance sheets." In addition, Park notes, "The pace of mergers and acquisitions has also been subdued in comparison to previous years of inflated stock prices and low-cost debt."
The report's third author, Ken Chan, a Moody's vice president and senior analyst, says, "In a down market, with financing being less available and more expensive, Moody's expects both consumer-product companies and retailers to focus on maintaining liquidity levels and inventory turns."
He added, "Balance-sheet liquidity is good for many rated firms."
The report contrasts the regional issuers' performance with that of peers elsewhere, noting that many of the rated companies in this region enjoy dominant market positions in their respective domestic markets and have, therefore, been better positioned to achieve like-for-like sales growth in 2009. Moreover, Moody's says that the local economies in Australia, China, and Indonesia, which are home to a majority of its issuers in the consumer-products and retail sectors, have also held up better than in the U.S. or Europe.
The new report, entitled "Asia-Pacific Consumer-Products and Retail
Sectors: Continued Stable Outlook with Negative Pressure on Discretionary Sales", is available at www.moodys.com.
In determining corporate ratings for issuers in the consumer-products sector, Moody's uses its global methodologies either singly or in combination for (1) packaged goods, published in February 2005, (2) alcoholic beverages, from November 2005, and (3) soft beverages, from August 2005. For retailers, Moody's uses its global methodology for the retail industry, published in December 2006. The methodologies are available at www.moodys.com under the credit-policy directory and rating-methodologies subdirectory.
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Sydney
Ian Lewis
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Pty Ltd
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Sydney
Terry Fanous
Senior Vice President
Corporate Finance Group
Moody's Investors Service Pty Ltd
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