New | China developers face tough sell raising funds as recent defaults send chill through corporate bond market
Property developers will likely find it harder to sell debt amid climate of heightened risk aversion
Defaults on onshore loans by mainland Chinese companies have triggered alarm among investors, igniting concerns that heightened risk aversion by creditors could affect the outlook for Chinese developers, who accounted for the lion’s share of local debt issuance last year.
About 40 per cent of corporate bond issuance in China in 2015 was done by property developers, spurring concerns the sector will face difficulties raising additional funds this year, even as they enjoy robust liquidity thanks to an upturn in the property market.
About 1 trillion yuan (HK$1.2 trillion) in corporate bonds were issued on the mainland in 2015.
In late 2014 property developers were allowed to issue new debt, as Beijing reversed its earlier ban on fund raising that was imposed as part of measures to help cool the property sector.
Alan Jin, a property analyst at Mizuho Securities, said mainland property developers shouldn’t be seen as a major credit risk in 2016.
Property sales in the first quarter totalled 600 billion yuan, exceeding the sector’s total corporate bond issuance of 400 billion yuan in 2015, he said.