Chinese developers' bond returns boosted by property easing measures
Mainland developers' bonds posting higher returns following Premier Li Keqiang's moves to ease financing for struggling property sector
Developers are leading returns in the mainland's bond market for this half and are planning more offerings as Premier Li Keqiang opens financing channels and eases property restrictions to shore up the slumping industry.
Yuan-denominated real estate securities have advanced 4.3 per cent since June 30, the most among sectors that have more than one bond in Bank of America's China corporate index. At least 12 homebuilders including China Vanke, the mainland's biggest, have said since early September they aim to raise 76.7 billion yuan (HK$96.94 billion) in the interbank market. Regulators last month said they will allow such offerings for the first time, according to China Investment Securities.
The developers are increasing bond offerings to help refinance 81.8 billion yuan of debt due next year. New home prices fell in all but one city monitored by the central government last month. That is fuelling speculation Li will increase industry support after easing mortgage requirements and authorising property firms to issue notes on the smaller exchange-traded market for the first time in five years earlier this year.
"The property industry may stabilise in the first half of next year due to the policy support from the government," said Cheng Peng, head of investments at Beijing-based Genial Flow Asset Management. "When developers start issuing bonds on the interbank market, we will certainly buy some."
China Vanke plans to sell as much as 15 billion yuan of bonds, according to a company statement to the Shenzhen Stock Exchange on September 22. Guangzhou R&F Properties plans to offer as much as seven billion yuan of notes, according to a September 19 statement to the Hong Kong stock exchange.
Li has taken steps to prevent a sharper decline in the real estate industry as he seeks to meet a target for economic growth of about 7.5 per cent this year. Gross domestic product climbed 7.3 percent in the third quarter, the slowest pace since the first three months of 2009.
The People's Bank of China eased mortgage rules on September 30 for homebuyers who have paid off existing loans, reversing course after a four-year campaign to contain home prices. Local governments in 37 out of 70 major cities have eased home-loan restrictions to help avert a sharper slump in the property market, according to a Moody's Investors Service report.