27 February 2020

Gearing ratio of H-share index non-financials at 69%, paper says

The net gearing ratio, defined as net debt divided by shareholders’ equity, of non-financial firms on the H-share index is at 69 percent, up 5 percentage points from a year earlier, Apple Daily reported Monday. Firms in the power, resources and infrastructure sectors have seen their gearing ratios rise most sharply, it said. China National Building Material Co. Ltd. (03323.HK), for instance, is said to have seen a 456 percent spike in its net gearing ratio while Huaneng Power International Inc. (00902.HK, 600011.CN) saw its ratio go up 234 percent. Total debt of the non-financial firms has exceeded 2 trillion yuan (US$321.94 billion), up nearly 17 percent year on year, with short-term debts shooting up by 31 percent, the report said. David Lui, vice chairman of Bank of Communications Schroder Fund Management Co. Ltd. said rising interest rates in the mainland may weaken the firms’ ability to repay debts. A sharp rise in short-term borrowings reflects the pressure the firms are facing, the report said.

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