Pimco doubts China property market recovery without more funding as confidence and full use of capital raising tools have been lacking
- Pimco says China’s beleaguered property sector needs nationwide support, fuller use of capital raising tools for a meaningful recovery
- The fund manager is selective on China’s high-yield property bonds, focusing on the developers’ ability to secure funding and quality assets available to monetise
China’s beleaguered property sector needs a more comprehensive policy approach and a wider usage of different funding channels for a meaningful recovery, according to Pacific Investment Management (PIMCO).
“Confidence is elusive so far and may require nationwide messaging rather than city-specific announcements,” Stephen Chang, managing director and portfolio manager at Pimco Asia, said in an interview. A full use of the so-called three arrows – the capital-raising tools of bond financing, bank loans, and equity funding – has been lacking, with a “near absence” of the latter, he said.
China’s real estate sector is still reeling from its worst-ever debt crisis that triggered a wave of defaults last year. The outlook remains dim, with analysts at Goldman Sachs projecting an L-shaped recovery in the coming years as policymakers appear determined not to use the sector as a short-term stimulus tool.
A rally in shares of Chinese property developers quickly pared on Tuesday following an unexpected cut in the central bank’s short-term policy rate, suggesting market sentiment remains cautious. China high-yield property bonds were mostly unchanged, according to credit traders.
Bond-market titan Pimco is selective on China’s high-yield property bonds, focusing on the developers’ ability to secure funding and the amount of quality assets available to monetise, according to Chang, who spoke before Tuesday’s rate action by the People’s Bank of China.