U.S. Gaming Companies Tread Risky Ground

Regional gaming companies in the United States run the risk of falling into a precarious financial situation and entering speculative-grade rating territory. Though they have the cash flow to improve their balance sheets, they hang on to large loads of debt, according to a new report from Moody’s Investors Service.

“The combined amount of debt held by regional gaming companies has barely budged over the past 18 months, contrary to our expectation that many would use free cash flow to repay debt in an effort to de-risk their balance sheets,” said Moody’s Senior Vice President Keith Foley.

The gaming industry carries high fixed costs. Many regional gaming companies are expected to carry debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratios at or above five times through next year, Foley said. If a sudden drop in patronage were to occur, those companies who are highly leveraged could fall deeper in debt rather quickly. Though EBITDA will continue to increase, it may not grow at a pace that would improve leverage levels due to the few opportunities to reduce operating costs. Improvement in the debt-to-EBITDA ratio in the near term will likely be limited unless absolute debt is reduced.

Few incentives exist to deal with absolute debt, however. Free cash flow is positive, debt maturities are far in the future and chances to make acquisitions remain present. Those acquisitions have a positive effect on earnings and asset profiles, but they are also a financial burden that adds to the industry’s high financial risk, Moody’s said.

– Adam Fusco, associate editor

Expectations Fall for German, Eurozone Economies

A significant decrease in expectations has been registered for the German economy that also reflects on the eurozone as a whole. The Indicator of Economic Sentiment from the Centre for European Economic Research (ZEW) dropped a considerable amount in August, 7.5 points, to a level of 10. This is significantly below the long-term average of 23.8 points. The indicator for the current economic situation in Germany increased slightly, however, and now stands at 86.7 points.

“The significant decrease of the ZEW economic sentiment indicator reflects the high degree of nervousness over the future path of growth in Germany,” said Professor Achim Wambach, president of ZEW. “Both weaker-than-expected German exports as well as the widening scandal in the German automobile sector, in particular, have helped contribute to this situation. Overall, the economic outlook still remains relatively stable at a fairly high level.”

Expectations for eurozone growth are slightly lower than those for Germany. The indicator for financial market experts’ expectations for such growth dropped by 6.3 points in August. However, the indicator for the current economic situation in the eurozone has increased since November of 2016 and now stands at its highest level since January 2008. It rose 9.7 points higher in August, ZEW said.

Another index that has contributed to the view that the German and eurozone economies are slowing down is the Markit Manufacturing Purchasing Managers’ Index for July, Wells Fargo Securities said in a recent report. After hitting highs in June, indexes for both Germany and the eurozone dipped marginally in July. A further decline may solidify the view of a slowing-down economy in the region, Wells Fargo said.

– Adam Fusco, associate editor

Greece Upgraded, with Outlook Positive

In light of ongoing compliance with the conditions of the European Stability Mechanism (ESM) program, reduced political risk and sustained growth of GDP, Fitch Ratings has upgraded Greece’s rating to B- from CCC. The rating carries an outlook of positive.

The economy of Greece is undergoing a gradual recovery. Indicators signal growing economic activity, though ESM program delays weighed on confidence and private-sector payments in the first quarter. With rising consumer and business confidence, the European Commission economic sentiment indicators reached a two-year high in July. Fitch expects real GDP growth of 1.6% and 2.1% in 2017 and 2018, respectively. Domestic demand should be boosted by a decline in unemployment, continued clearance of government arrears and increasing investments.

The successful completion of the second review of the ESM program has reduced the risk of a fall in confidence or an increase of government arrears with the private sector. Fitch expects that the third review of the adjustment program will result in no increase of instability and that the Eurogroup will grant significant debt relief to the country next year.

In Fitch’s view, an important development is the Eurogroup’s plan to connect debt relief measures to actual growth outcomes after the program period. This should increase confidence that government debt is on a sustainable path. European partners appear to be changing focus from strict fiscal targets to the restoration of medium-term GDP growth, Fitch said.

– Adam Fusco, associate editor

First Insolvency Case under New Indian Bankruptcy Code Goes Forward

Aug. 18, 2017

India’s National Company Law Tribunal (NCLT) has approved the country’s first insolvency resolution order under the new Insolvency and Bankruptcy Code, 2016.

The plan for Synergies-Dooray Automotive Ltd., a company that manufactures alloy wheels, submitted its application to the NCLT January 23, according to a report in Money Control. The firm’s resolution plan was submitted within the code’s 180-day deadline.

The bankruptcy law passed Indian Parliament in May 2016 and went into effect in December, replacing the nest of rules and regulations formerly in place to tackle bad loans and nonperforming assets in the Indian economy. The total claim against Dooray from financial creditors, including three asset reconstruction companies, is roughly $15.2 million, according to a report in Livemint.com.

“There were three resolution plans out of which one was selected,” said Mamta Binani, the insolvency resolution professional for Synergies-Dooray and past president of Institute of Company Secretaries of India (ICSI), in the Livemint article. “The other two plans had good money in them, but the companies infusing capital were from a trading background. We went with the plan which had some manufacturing background to keep the company as a going concern. Putting in money is not the end of it. The selected plan also takes care of dues of operational creditors and the government, which is generally not the case when the liquidation value is zero. We are increasingly seeing that committee of creditors are conscious of the dues of operational creditors, as these are mostly small and medium enterprises, and if their dues do not get paid, then the companies can go under and overall hurt the economy.”

– Nicholas Stern, managing editor

Growth Accelerates in Eurozone

Growth is accelerating in the eurozone, reflecting the region’s broad cyclical recovery, though the pace of growth may slow next year, according to a new report from Fitch Ratings.

Factors that have supported growth include a reduction in political risk following the French elections, a rise in business confidence and improvement in export demand. Unemployment this June reached an eight-year low, which boosted consumer confidence. Policy support for the economy also has gained ground, with credit standards for loans to businesses easing this year.

Fitch raised its 2017 GDP growth forecast for the region to 2.0% from 1.7% in June. Growth is expected to slow to 1.8% in 2018. As the benefits in the drop in energy prices wear off, consumption demand is expected to decrease as well. In addition, negotiations surrounding Brexit and questions over U.S. trade policy create uncertainties over international trade.

Fitch expects growth potential in the medium term will be constrained for major economies by 2019 due to demographic and productivity trends, as well as a narrowing of output gaps. Near term, however, growth in the region should remain above the potential rates seen in recent quarters. Growth potential in advanced economies is expected to fall in the range of 1.25% to 1.75% over the next five years, Fitch said.

– Adam Fusco, associate editor

NAFTA Talks Begin in Washington

Reworking the North American Free Trade Agreement (NAFTA) has been a focus point of the Trump administration since last summer. Talks between the U.S., Canada and Mexico started in Washington today to discuss the nearly 25-year-old pact.

American officials want to continue with their protectionist views by removing dispute-resolution panels within NAFTA, said the Wall Street Journal. The panels are designed to sustain or overturn tariffs during conflicts. Both Canada and Mexico are in support of keeping the panels. These panels fall under Chapter 19 of NAFTA. If it is done away with, tariff disputes would then enter national courts or go before the World Trade Organization.

Rules of origin, especially in the automotive industry, is another topic set to be discussed, according to the Washington Post. Roughly two-thirds “of the total value of the components in a car have to come from within North America in order for that automotive to move across North American borders tax free,” said the Post.

Meanwhile, positive negotiations will not improve Mexico’s growth, according to Moody’s Investors Service. "NAFTA has not remedied Mexico's low growth, low productivity and low wages," said Madhavi Bokil, a Moody’s VP and senior analyst, in a release. “Successful NAFTA talks alone will not fix structural impediments to Mexico's growth,” he added.

Updating the rules of origin and the overall trade pact could both benefit Mexico and its economic reform efforts, said a press release from Fitch Ratings. “Changes to the treaty do not put Mexico's industrial sector at a disadvantage in the U.S. market,” said Fitch. “Trump’s protectionist turn could help Mexico further diversify its export destinations and reduce its overdependence on the U.S. for its foreign trade,” said a report from credit insurer Atradius.

U.S. and Mexican officials are looking to close the door on negotiations, with a new deal by early next year due to elections. The general election in Mexico is in July, while the U.S. has an election in November. All three sides are expected to meet in Mexico next month.

– Michael Miller, editorial associate

Chinese Internet Companies with Finance Operations May Suffer Weak Credit Quality

Chinese internet companies that conduct finance operations may be weakening their credit quality. Finance operations offer loans to consumers and merchants, distribute wealth management products and allow consumers to make purchases on a company’s platform. But if they are consolidated into the company’s financials, they are usually funded by debt, do not produce meaningful profits and lack a track record of borrowers making timely repayment of loans, according to a new report from Moody’s Investors Service.

“Loans to consumers and merchants and distribution of wealth management products—two of the primary services that finance operations provide—can also lead to contingent liabilities and potential capital calls for internet companies,” said Lina Choi, a Moody’s vice president and senior credit officer. “These risks will persist even after the finance operations are deconsolidated, although further removed from the core business. The loans and wealth management services will still be offered with the internet companies’ brand names, and the strategic relationship between the core and finance operations remains.”

Of the five rated Chinese internet companies, four have finance operations: e-commerce platform Alibaba, search engine Baidu, and online retailers JD.com and Vipshop Holdings Limited.

Risks are mitigated, however, due to strong liquidity and the synergies between each company’s core business and the finance operation. Alibaba, JD.com and Vipshop can generate higher transaction volumes and cash flow through the loans  that they provide to those who conduct business on their platforms. Data gathered on consumers and merchants assist in determining to whom loans are offered and how much.

Alibaba’s risk exposure is lower than the other three companies because its finance operation is an associate company rather than consolidated in its financials. Baidu has a large cash buffer against capital calls, and both Baidu and Alibaba have larger cash buffers than JD.com and Vipshop, Moody’s said.

– Adam Fusco, associate editor

Solar Power Projects Require Lower Debt-Service Ratio than Wind Projects

Solar power projects typically require a lower debt-service cover ratio to achieve investment-grade status compared to wind projects, according a recently released report from Fitch Ratings. Electricity production from solar projects analyzed across the U.S., Europe, the Middle East and Africa have tended to exceed initial independent estimates, while wind projects have more often underperformed against initial estimates.

Fitch analysts looked at data collected since 2010 for wind and 2011 for solar projects in terms of initial P50 forecasts, or the annual production level the project is expected to exceed 50% of the time. They found that 70% of annual observations across solar projects met or exceeded the original P50 levels, while approximately 75% of wind project observations were below the P50 level and 43% were significantly below.

“Wind project underperformance is due to three factors,” Fitch said. “The greater technical challenge in forecasting led to some initial overestimation of power production. Higher natural resource volatility has affected some projects, including unusually low wind in the Western U.S. last year. And some wind projects have also been hit by problems with equipment.”

Solar projects, meanwhile, have benefitted from better-than-anticipated solar irradiance and plant availability. “The track record of solar projects is shorter, but they clearly have lower operational risk, better generation performance and lower volatility than wind projects,” Fitch analysts said. “They are also more resilient to downside scenarios, as shown by stronger financial metrics under one-in-100-year generation assumptions.”

Fully contracted, fully amortizing solar photovoltaic projects achieve an investment-grade rating from Fitch after achieving a 1.2x debt-service coverage ratio threshold, while the ratio for wind power projects is 1.3x.

– Nicholas Stern, managing editor

Reforming NAFTA May Not Be Enough to Fix Mexico’s Growth

Though renegotiation of the North American Free Trade Agreement (NAFTA) is scheduled to begin next week, it may not solve the factors hampering Mexico’s growth. Wage and productivity gaps with the United States have widened since the agreement’s inception, according to a new report from Moody’s Investors Service.

“NAFTA has not remedied Mexico’s low growth, low productivity and low wages,” said Madhavi Bokil, vice president and senior analyst at Moody’s.

NAFTA has continued to boost Mexico’s export competitiveness through a shift toward more complex production and integration with the U.S. economy, but the liberalization of its economy with its growth model focused on exports and access to the U.S. market has not resulted in the anticipated growth rates. The income gap with the U.S. will widen over time if productivity does not improve, Moody’s said. The country’s low productivity and wage growth is connected to uneven regional growth opportunities and a high degree of informality in its economy. Reduction in regional disparity is one objective of the structural reforms agenda.

Changes to the agreement may be more reserved than radical, however. “The talks on what the future of NAFTA will look like have started and the position of the Mexican government has emerged,” said Chris Kuehl, Ph.D., economist to NACM. “In the beginning, it appeared that Mexico would be in a defensive position, but times have changed and the advantage seems to lie with Mexico to some degree. The government of Enrique Peńa Nieto has refused to bend on some of the high-profile issues pushed by Trump, while those U.S. interests that have benefited from NAFTA have become more focused and organized. The modifications are likely to be far less drastic than was originally assumed.”

– Adam Fusco, associate editor

Chinese Bankruptcies Continue Rising in 2017

Bankruptcies in China will continue to increase the remainder of the year, yet the total number does not compare to those of other large economies. China saw more than 5,600 insolvency cases in 2016 after 3,600 in 2015, said a report from Fitch Ratings.

There were 4,700 cases filed in the first half of 2017 alone. Cases are being resolved at a higher rate as well with just over 3,600 last year, which is up roughly 40% from 2015. This year, there have been more than 1,900 resolved cases.

The reason for the rise in bankruptcies is partially due to China becoming more accepting. China’s authorities “have made efforts to improve the insolvency framework,” said Fitch. Zombie enterprises, which are entities that rely on government support and state bank assistance to stay afloat, “are responsible for the most significant corporate inefficiencies and account for the bulk of overcapacity.”

To put China’s bankruptcies in perspective, France had more than 55,000 last year, while the U.S. had less than 25,000. As an alternative to outright bankruptcy, “authorities may continue to favor mergers of weak companies with stronger ones,” added the report.

Fitch believes “bankruptcies are likely to continue rising quickly over the next few years in light of rising policy attention and the tightening of credit conditions since late 2016.” Firms will also face slower growth due to the deceleration in credit growth, which can be seen in Fitch’s gross domestic product growth forecast for 2018.

– Michael Miller, editorial associate

Tech Sector Most Efficient at Turning EBITDA into Cash Flow

The technology sector of the U.S. economy grew its corporate cash position again in 2016, amassing nearly half of the total accumulated for nonfinancial companies, and is likely to add more to the pile this year.

The top five most cash-rich companies in the U.S.—Microsoft Corp., Google Inc., Cisco Systems Inc. and Oracle Corp.—kept $594 billion in cash in 2016, or 32% of the total U.S. nonfinancial corporate cash, according to a recent report by Moody’s Investors Service. "The concentration of cash among the most cash-rich U.S. companies continued to grow last year, as did the proportion held by the technology sector, which accounted for close to half of the total," said Richard Lane, Moody's senior vice president. "Despite strong returns of capital to shareholders, we expect, absent tax reform, the technology sector's cash concentration to grind even higher over the next year because of its strong cash flow generation."

The health care/pharmaceuticals, consumer products, energy, automotive and manufacturing sectors all trailed tech in terms of cash holdings, analysts said.

Aggregate cash relative to debt climbed 37% in 2016, up from 34% in 2015 and higher than the 35% average over the past decade, Moody’s said. Cash flow from nonfinancial corporate operations dropped nearly 6% in 2016 to $1.45 trillion. Also, spending on plants and equipment decreased 18% last year, with reduced energy sector spending leading the pack.

“Reflecting the decline in cash flow from operations that was more than offset by reduced capital expenditures, U.S. nonfinancial corporates generated a record $720 billion in discretionary cash flow in 2016, up 11% from 2015,” Moody’s said. “The technology sector has, on average, turned 72% of EBITDA into discretionary cash flow in the past 10 years, making it the most efficient sector in this regard.”

– Nicholas Stern, managing editor

Small Businesses Continue Optimism Streak

Optimism continues apace among small business owners, continuing a streak that started shortly after the U.S. presidential election. The Index of Small Business Optimism from the National Federation of Independent Business (NFIB) rose 1.6 points to 105.2 in July, with seven of the 10 components in the index posting a gain, two declining and one unchanged. Stronger consumer demand was apparently the key, which was a major contributor to growth in the second quarter of 2017, according to the NFIB.

“There’s nothing like more customers to make owners happy, and optimism held up, as did important measures of spending and hiring plans,” the NFIB said.

A seasonally adjusted net 19% of small business owners plan to create new jobs, an increase of four points, with higher levels not seen since December 1999. A full 60% reported hiring or trying to hire, though more than half said that they were finding few or no qualified applicants for their open positions. Finding qualified workers was a particular problem in construction and manufacturing.

"The number of owners trying to fill positions and create new jobs is very high," said Bill Dunkelberg, NFIB chief economist. "That's good news for workers, because they can command higher wages and better benefits. The bad news is that small business employers are finding it very hard to hire and keep their workers."

An unchanged 57% reported capital outlays, with spending on new equipment, vehicles, and improved or expanded facilities. Five percent acquired new buildings or land for expansion.

Among small business owners, 3% said that all their borrowing needs were not satisfied, which is a decrease of 1 point and a low reading, historically. About 31% reported that all credit needs were met and just over half said that they were not interested in a loan. Only 2% said that financing was their top business problem.

– Adam Fusco, associate editor

China’s Regulation of Its Shadow Banking Sector is Showing Some Results

Chinese authorities’ moves to dampen credit growth and liquidity conditions, as well as their efforts to regulate the nation’s shadow banking industry, appear to be having a modest effect in moderating the growth of wealth management.

"However, the authorities are also engaged in a delicate balance to ensure that tighter credit and liquidity conditions do not trigger financial instability," said Michael Taylor, a Moody's Investors Service managing director and chief credit officer for Asia Pacific, in a new report on the topic. "Tighter market liquidity is being partially offset by higher lending to the banking system by the People's Bank of China, while regulators are offering grace periods for the implementation of new policy guidelines.”

Borrowers are increasingly turning to formal bank lending, as well as lending by the relatively more highly regulated parts of the shadow banking sector, like trust companies, as regulation has tightened around shadow banking in general, analysts said. "The rotation of credit supply to these sources improves transparency and could increase the system's resilience in the face of unexpected shocks," said George Xu, a Moody's associate analyst. "However, it remains unclear whether credit from these sources will be sufficient to replace credit supplied by the shadow banking components that are now subject to closer regulatory scrutiny."

Refinancing risk is thus growing for borrowing businesses in China that have grown reliant on the shadow banking industry, including property developers, local government financing vehicles and state-owned enterprises in overcapacity industries, Moody’s said. The gap between overall credit growth in the Chinese shadow banking sector and the growth rate of nominal GDP has shortened in recent months. Also, the growth in credit assets like wealth management products has apparently slowed, thanks to regulation. “Moody's points out that the challenges associated with regulatory tightening are illustrated by a strong rebound in new negotiable certificates of deposit issuance and the increase in the banks' net claims on nonbank financial institutions, both indicators of continuing system interconnectedness,” the ratings agency said.

– Nicholas Stern, senior editor

U.S. Virgin Islands the Next Puerto Rico?

Another U.S. territory is facing financial distress. The U.S. Virgin Islands has joined Puerto Rico in an effort to stay afloat.

The islands owe more than $2 billion to bondholders and creditors, according to Reuters. “For years the U.S. Virgin Islands funded essential public services with help from Wall Street. Investors lined up to purchase its triple-tax-exempt bonds, a form of debt free from municipal, state and federal taxes.”

Firms have downgraded the territory’s credit rating to junk, which has affected the bond market in the region. “With the U.S. Virgin Islands shut out of the credit markets after a failed January bond issue, officials are scrambling to stabilize its finances after years of taking on debt to plug yawning budget holes.”

To help settle the bond debt, “The governor has sent down a five-year plan, and this is just one small portion of his plan to ensure that the territory is self-sufficient,” said Tamarah Parson-Smalls, Bureau of Internal Revenue chief counsel, in a Marketplace.org article. Gov. Kenneth E. Mapp approved sections of a bill to increase taxes on alcoholic beverages and impose an Environmental/Infrastructure Impact Fee on timeshare owners. According to the article, “some vacationers in the U.S. Virgin Islands will face a new $25-a-day fee for using a timeshare. The fees are expected to bring in $19 million per year.

The Virgin Islands also face more than $3 billion in unfunded pension and health care. Debt loads for the Virgin Islands and Puerto Rico have surpassed 50% of their gross domestic products, said Reuters. The government and two public hospitals owe the territory’s water and power authority (WAPA) nearly $30 million. WAPA in turn owes two former fuel vendors $44 million, added Reuters.

In March, Gov. Mapp requested an 8% budget reduction for cost saving measures. There is a projected $100 million budget shortfall this year. “[I am] confident that, together, we can achieve the fiscal balance that has for too long eluded us,” he said according to his website.

-Michael Miller, editorial associate

Moody’s, Kamakura Indexes Reveal Improving Default Rates

A downward trend continues in the trailing 12-month default rate among U.S. speculative-grade companies, despite a rise of U.S. nonfinancial defaults in the second quarter of 2017, according to a recent report from Moody’s Investors Service. The commodities sector accounts for the highest number of defaults, though problems in the sector are easing.

“We see a combination of cash flow that is bolstered by economic growth, good intrinsic company liquidity and fewer commodity sector strains fueling a drop in the U.S. speculative-grade corporate default rate to 2.8% a year from now,” said Moody’s Senior Vice President John Puchalla.

Companies in the retail sector continue to struggle with the change in consumer spending habits. Defaults are rising in that sector.

“The decline in brick-and-mortar store traffic, in conjunction with the shift in consumer spending to digital channels, is contributing to retail earnings weakness and increased credit strains this year,” Puchalla said. “Even so, retail defaults are not making up for the decline in commodity defaults, as the retail and apparel default rate—at 4.4% in the second quarter—remains well below the default rate for commodity sectors.”

A continued reduction in the default rate can be expected over the next year, the ratings agency said, as its Liquidity Stress Index dropped nearly two percentage points in the second quarter. Reduced risk of default and a boost to speculative-grade liquidity can be found in earnings growth and favorable conditions for refinancing and raising investment funds, Moody’s said. However, the default atmosphere is still vulnerable if the economy deteriorated or if geopolitical issues disrupted trade.

Meanwhile, the Kamakura troubled company index ended July with a decrease of nearly half a percentage point from the previous month. The decrease indicates improving credit quality. Among the 10-riskiest rated firms in July, seven were from the United States, two from Great Britain and one from Singapore, Kamakura said.

– Adam Fusco, associate editor

U.S. Oil and Gas Volumes on Close Watch

U.S. midstream oil and gas volumes could take a hit in the second half of the year due to oil’s per barrel price range, according to Fitch Ratings. The credit insurer’s outlook on the midstream space is still stable, yet “higher cost of equity capital could raise leverage for some issuers, and credit metrics are stressed for some,” said Fitch. “Volume pressure in second-half 2017 and 2018 could erode metrics further.”

On the positive side, liquidity and capital market access have supported the midstream stable outlook, Fitch added. The release from Fitch said the Permian, SCOOP/STACK and Marcellus/Utica production basins have remained steady, but others in the U.S. will see lower production volumes.

Fitch believes the Permian basin has great potential for growth, having seen a 10% production jump in the 12 months ending April 30. It also saw increases in crude and natural gas. Meanwhile, “Oklahoma as a whole has not been strong,” said Fitch. The SCOOP and STACK basins has been the bright spot. Natural gas production was down 12% at Eagle Ford in south Texas on a year-over-year basis.

Midstream companies will also have regulatory risks, especially ones with new pipeline construction. “While not necessarily an immediate credit concern, regulatory delays and uncertainty could negatively affect project returns and capital spending budgets,” said Fitch. “The outlook for oil and gas production later in the year should remain a major focus area.”

– Michael Miller, editorial associate

Stability in Asia-Pacific Corporates to Continue through 2017

A stable rating trend among nonfinancial corporates in the Asia-Pacific region in the second quarter of 2017 is likely to continue through the rest of the year, according to a new report from Moody’s Investors Service.

“The stable rating trend for 2H 2017 will be supported by broadly based global growth, stronger export demand and the recovery of commodity prices,” said Clara Lau, a group credit officer at Moody’s.

The share of negative ratings among nonfinancial corporates in Asia, which excludes Japan, Australia and New Zealand, fell 10% from the end of March to the end of June. Ratings with stable outlooks reached a 74% share by the end of June, the highest since the end of the first quarter of 2015. Negative ratings actions outpaced positive actions from Moody’s in the second quarter of 2017.

In Moody’s Japanese portfolio, negative implications among nonfinancial corporates dropped to 24% from 29% at the end of the second quarter from the previous quarter. In the agency’s Australian portfolio, the share of negative ratings stayed at 12%, which reached a high of 23% a year ago.

The metals and mining industry in the Asia-Pacific region has bottomed out, resulting in easing of pressure on those companies, Moody’s said. Negative implications in that portfolio dropped to 27% at the end of the second quarter from 60% at the end of the first. Pressure continues in the retail sector, however, with more than 30% of retail companies holding negative implications. With national sales slowing and a tightening in regulatory measures, 23% of developers’ ratings in the property sector show negative implications.

– Adam Fusco, associate editor