KUALA LUMPUR (Nov 11): Credit quality among retail companies in the Asia-Pacific region is likely to be stable overall for at least the first half of 2012, despite variations in the growth prospects of different markets and growing concerns about a global economic slowdown, according to Standard & Poor's Rating Services.
In report entitled "Consumers Are Still Opening Their Wallets For Asia-Pacific Retailers Despite Recession Worries' released on Nov 11, S&P said solid consumer spending would continue to support the performance of retail companies in the region, especially in China, Korea, and Indonesia.
'While consumers in Australia and Japan are somewhat more cautious, we do not believe they are particularly pessimistic,' it said.
Overall, continued relatively solid consumer demand had made retailers in the Asia-Pacific region keen to invest in new stores and pursue mergers and acquisitions (M&A), said S&P.
'As such, we expect corporate investment policies, and industrywide consolidation in some countries, to play a key role in our credit analysis of retailers in the region.
'Furthermore, we believe growing numbers of middle-income earners, solid consumption, and relatively high growth prospects in most markets will mitigate the impact of a potential global slowdown,' it said.
S&P said that growth in China's retail sector continued to be solid despite market fragmentation and intense competition from local and foreign peers.
'Among our other findings, we consider online retailing an attractive tool for brick-and-mortar retailers but expect that low barriers to entry and intense competition will make it hard for most to generate new or stronger earnings, or significantly improve their credit profiles, from online sales in the next one to two years,' it said.