Taiwan Ratings Corporation (TRC,中華信評), a local arm of Standard & Poor’s, yesterday said the credit quality for Taiwan’s leading companies was largely stable last year, but they face negative risks this year and beyond as the global economic downturn and soaring raw materials costs could weaken their profitability.
“Taiwan’s top 100 firms were stable last year in terms of credit rating,” TRC chief ratings officer Daisuke Fukutomi told a news conference.
But these companies face profitability challenges caused by a global economic slowdown, surging raw materials costs and new accounting practices, Fukutomi said.
Of the 100 firms, 21 percent have below average credit quality, the TRC rating scale showed.
TRC said it expected export-oriented industries to be the hardest hit by the economic downturn that has dampened demand, and the trend has spread from the US to Europe and emerging markets in Asia.
Fukutomi said midstream and downstream high-tech companies would also be hurt because they are unable to pass on the growing costs.
Daniel Hsiao (蕭黎明), director of TRC corporate ratings, said liquidity would be a critical factor for the companies to weather the economic slowdown.
Some of the 100 companies need to fund growing account receivables as they expand their revenue and inventory levels because of material costs, Hsiao said.
The ratings company, while positive about the government’s recent easing of rules governing cross-strait trade, said it was too early to gauge its impact.
Frank Fan (范維康), the company’s associate director of corporate and funds ratings, said the recent waves of deregulation have fanned positive sentiment but it would take time to weigh the associated benefits. Fan said that he believed the deregulation came too late.
The Cabinet has raised the ceiling of China-bound investment from 40 percent to 60 percent of a company’s net worth and allowed foreign firms with Chinese capital to list on Taiwan’s stock market.
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