Mainland property developers, many of which have been borrowing heavily to fund growth, could face negative rating actions from Standard & Poor's after the ratings agency warned the sector was likely to suffer as a result of credit tightening and slow sales.
In a report yesterday, S&P said it might have to revise ratings to negative on highly geared mainland property developers in the next six to 12 months if expected weak sales took a toll on the companies' financial positions.
Mainland developers have taken out large loans and debt to fund their buying sprees to boost their land banks over the past five years.
According to a report by HSBC last month, direct lending from banks to property developers amounted to 2.49 trillion yuan (HK$2.99 trillion) as of the end of the first quarter this year, constituting 5 per cent of total outstanding bank loans.
A popular but more costly way for mainland developers to borrow is to sell bonds.
Bonds issued by mainland property developers made up about half the high yield bonds issued in Asia.
Since the beginning of this year, rated Chinese developers have issued US$8 billion in offshore bonds, compared with US$8.8 billion for the whole of last year, the last peak for the sector, S&P said.