Fed move offers relief to developers

The US Federal Reserve's decision last week to postpone the tapering of quantitative easing might offer psychological relief to some highly geared mainland developers, which have nearly US$8 billion in outstanding bonds due to mature from now to next year, but it is unlikely to spark a market turnaround.

Investment bank UBS expects the tapering of quantitative easing could return in January, even though the Fed shocked the market on Wednesday by saying it would continue with its bond-buying stimulus programme.

Kaven Tsang, a vice-president at credit agency Moody's Investors Service, said liquidity would undoubtedly be tightened once tapering took place.

"Those companies with lower credit ratings will be the most affected", he said, as they could face higher borrowing costs when seeking to refinance loans.

Among the 42 developers that Moody's rates, Tsang said companies rated in the single-B range or below, such as Evergrande and Kaisa, would face higher lending rates in a credit-tightening environment.

According to data compiled by financial markets data provider Dealogic, the total value of bonds issued by mainland developers due to mature this year stands at US$1.08 billion, with a further US$6.66 billion due next year and US$7.83 billion due in 2015.

But Tsang said major developers such as China Overseas Land & Investment would not be affected because their cash-flow position had improved significantly after strong property sales in the first half of this year.