Moody’s has stable outlook for Asia-Pacific retailers, consumer products

Sydney, June 25, 2009 -- 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.