Analysts shift to liquidity gauge in evaluating developers

A year ago, the most popular question from property stock analysts after developers' results presentations was how fast the firms could refill their land banks for expansion. Today, analysts have other concerns.

As CCB International Securities analyst Raymond Cheng Wai-mo said, the questions have turned to: 'What is the company's cash-flow situation?' 'Does the company have enough investment funds?'

After enjoying good earnings last year, Mr Cheng said mainland developers were being affected by internal policy changes and a deteriorating economic environment.

Austerity measures introduced in the fourth quarter of last year - particularly a more stringent mortgage approval process, bigger down-payment ratios and more restrictive project financing - have shrunk cash flows and trimmed bottom lines.

Developers also find it harder to get approvals for A-share listings. And with investors taking a pessimistic view of mainland property stocks, they can hardly turn to the Hong Kong market for alternative funding. Nor is the bond market viable in view of the global credit crunch.

'Faced with such a challenging environment, liquidity is the most important factor to evaluate developers this year,' Mr Cheng said.