Xinhua Far East Upgrades the Issuer Rating of SGIS Songshan Co Ltd from BB- to BB; Its Rating Outlook Changed from Negative to Stable

Xinhua Far East Upgrades the Issuer Rating of SGIS Songshan Co Ltd from BB- to BB; Its Rating Outlook Changed from Negative to Stable

June 01, 2007

    HONG KONG, June 1 /Xinhua-PRNewswire/ -¨C Xinhua Far
East China Ratings ("Xinhua Far East") today
upgraded SGIS Songshan Co Ltd's ("SGIS" or
"the company", SZ A 000717) issuer credit rating
from BB- to BB. The company's rating outlook was also
changed from negative to stable.

    (Logo: http://www.xprn.com/xprn/sa/200611140926.gif )

    The rating action was mainly prompted by the present
better-than-expected sector environment, expectations that
the company's financial flexibility will further improve in
the favorable domestic capital market, and the company's
strengthening strategic position while the sector is
undergoing consolidation. Even so, SGIS's investment in
capacity and technology has not significantly improved its
competitive position, with the company's aggressive
financial policies and its poor record in coping with
industry downturns preventing it from obtaining a higher
rating.

    With China's steel prices recovering in 2006, SGIS's
turnover rose by 16.9% to RMB12.4 billion in 2006. The
company's gross margin rose to 7% in 2006 from 4.1% in 2005
and, with prices continuing to rise in 2007, its gross
margin reached 8.6% in the first quarter of 2007. We expect
strong domestic and foreign demand will offset the pressures
the company faces from overcapacity and rises in input
costs. A better-than-expected sector environment may help
it to avoid facing extremely tough demands on capital in
the near term.

    SGIS issued RMB1,538 million in convertible bonds to
replace the same amount worth of bank loans in February
2007. We believe most bond investors will convert the bonds
to common stock given that its common stock price is
significantly above the strike price, a move which will
lower the company's debt to capital ratios.

    With the steel industry undergoing a new round of
mergers and acquisitions in China and globally, as a result
of high industry concentration upstream and intensifying
competition, we expect SGIS may enjoy higher financial
flexibility. SGIS is an attractive target for domestic
first-tier steel groups because of its leading exposure to
Guangdong Province, one of China's top steel consuming
regions.

    Even so, the company's competitiveness remains
relatively weak, compared to its domestic peers, in terms
of capacity and its product mix, even though its product
mix is more upgraded than it once was. Further, the
company's profitability tends to be fragile when the sector
goes through hard times, while its financial policies are
aggressive. It also faces the possibility that its capital
expenditure will rise if it cooperates with domestic large
steel groups in new investment projects. We believe the
progress the company has made thus far is insufficient for
it to be assigned a higher rating at this time.

    The company's rating outlook is likely to remain
stable, provided there are no unforeseen huge capital
expenditure demands, with its currently disclosed capital
expenditure plan expected to be covered by operating cash
flow.

    A regional steel producer primarily focusing on China's
Guangdong Province, SGIS has a capacity of more than five
million tons, providing medium plates, deformed bars and
wire rods. The company's controlling shareholder is
Guangdong Province's State-owned Assets Supervision and
Administration Commission, which holds a 45.2% stake.
    
    For the rating report summary, please visit
http://www.xinhuafinance.com/creditrating .

    About Xinhua Far East China Ratings

    Xinhua Far East China Ratings (Xinhua Far East) is a
pioneering venture in China that aims to rank credit risks
among corporations in China. It is a strategic alliance
between Xinhua Finance (TSE Mothers: 9399), and Shanghai
Far East Credit Rating Co., Ltd. Shanghai Far East became a
Xinhua Finance partner company in 2003 and the first China
member of The Association of Credit Rating Agencies in Asia
in December 2003.

    Capitalizing on the synergy between Xinhua Finance and
Shanghai Far East, Xinhua Far East's rating methodology and
process blend unique local market knowledge with
international rating standards. Xinhua Far East is
committed to provide investors with independent, objective,
timely and forward-looking credit opinions on Chinese
companies. It aims to help investors differentiate the
credit risks among the corporations in China, thereby,
cultivating their awareness and promoting information
disclosures and transparency in China market. For more
information, see http://www.xfn.com/creditrating .

    About Xinhua Finance Limited

    Xinhua Finance Limited is China's premier financial
information and media service provider and is listed on the
Mothers Board of the Tokyo Stock Exchange (symbol: 9399)
(OTC ADRs: XHFNY). Bridging China's financial markets and
the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through five focused and
complementary service lines: Indices, Ratings, Financial
News, Investor Relations, and Distribution.  Founded in
November 1999, the Company is headquartered in Shanghai,
with offices and news bureaus spanning 11 countries
worldwide.  For more information, please visit
http://www.xinhuafinance.com . 

    About Shanghai Far East Credit Rating Co., Ltd

    Shanghai Far East Credit Rating Co., Ltd. is the first
and leading professional credit rating company with
comprehensive business coverage in China. It is an
independent agency established by the Shanghai Academy of
Social Sciences with the mission to develop internationally
accepted standards for capital market in China. The company
is a pioneer in conducting bond-rating business in China.
For years, it has been authorized by the Shanghai branch of
the PBOC to undertake loan certificate credit rating.

    Since establishment, it has rated over 1,000 corporate
long-term bonds and commercial papers, based on the
principles of objectivity, fairness and independence. The
company has also maintained over 50% market share in the
loan certificate-rating sector in Shanghai for three
consecutive years. With its strong local presence and
knowledge, it provides investors with unique and the most
insightful credit opinion. For more information, see
http://www.fareast-cr.com .


    For more information, please call:
 
     Hong Kong

      Joy Tsang, Corporate & Investor Communications
Director
      Xinhua Finance
      Tel:   [phone]
             [phone]
             [phone]
      Email: [e-mail]

      Scott Zhang
      Xinhua Finance
      Tel:   [phone]
      Email: [e-mail]

     US

      Mr. John P. Dudzinsky
      Taylor Rafferty (IR/PR Contact in US)
      Tel:   [phone]
      Email: [e-mail]