Standard & Poor's sees the credit quality of many Greater China companies, including those in Hong Kong, deteriorating as a result of the global recession. The United States-based credit rating agency said Hong Kong was on the verge of another recession after a slight rebound from the Asian financial crisis. As a result, some companies could face a credit-rating downgrade. This meant they would have difficulty raising funds in the debt markets or would need to pay higher interest rates on their debt paper to attract investors. During global economic downturns, only companies with the highest credit ratings were able to raise funds from the international bond markets, S&P said. 'Low-quality companies might encounter refinancing pressure due to a flight to quality in time of stress,' it said. The comments were made in its annual review of the financial data of 155 companies in Hong Kong, China and Taiwan. They included those in infrastructure, utility, telecommunications and industrial sectors. S&P said the credit quality of Hong Kong companies 'relying on external trade and international financial services will be hit the hardest'. 'Standard & Poor's views with caution the outlook on credit trends in Hong Kong since profitability and cash-flow protection measures are likely to come under pressure, while leverage is likely to remain stable.' Paul Coughlin, managing director, corporate and government ratings division in Hong Kong, said: 'Although the credit quality of many companies in the Greater China region will come under pressure due to the fallout of the worldwide economic recession, the severity will vary from market to market.' Hong Kong's open economy left its companies more likely to be hard hit by reduced domestic and international demand. By contrast, the closed nature of the mainland economy would continue to shield its companies from worldwide volatility. They would also be hit on external trade, but this would be offset by domestic demand. Taiwan firms were likely to deteriorate further as it faced a worsening slump in the electronics industry due to the slowdown in the US, its largest market. In terms of different industries in Greater China, the review said the worst hit industry sector so far was Hong Kong's infrastructure segment. Some companies with heavy exposure to China had deteriorated substantially, while others had already defaulted. 'Some developers have already sold part of their investments in China or invested in other Asia-Pacific markets,' it said. Hong Kong property companies were unlikely to see an improvement in their financial profiles because consumer confidence in property trading remained low. At the same time, demand for office space had declined. Hong Kong's telecommunications market was likely to subside due to industry consolidation in the near term. This would improve the weak profitability and overall financial profile of the major players, the review said. Mainland telecoms operators had recently been strengthening themselves as they prepared for competition from foreign firms after World Trade Organisation entry. At the same time, Taiwan telecoms operators were likely to remain stable.