Chinese developers issued 43% fewer bonds in the first quarter
(Yicai Global) Apr 7 – Sales of new bonds from Chinese real estate companies both at home and abroad fell 43% in the first quarter from the same period last year, as confidence market falls amid recurring Covid-19 outbreaks and ongoing geopolitical tensions and that supportive policies have yet to take effect.
Chinese developers raised 173.3 billion yuan ($27.2 billion) through bond issuance in the three months to March 31, and the decline widened 20 percentage points from compared to the same period last year, Securities Daily reported today, citing data from the Ke Research Institute.
One hundred developers raised CNY205.5 billion ($32.3 billion) in the first quarter, down 52.5 percent from a year earlier, according to the report, citing incomplete statistics from the CRIC Research Center. The sharp drop is mainly due to the large number of bases last year, he added.
Of the 123 Chinese yuan-denominated bonds issued, 94% were issued by state-owned or central enterprises, indicating that government-backed enterprises enjoy strong credit approval, are more recognized by the market and can get better rates, said Ke told the Institute.
The coupon rate for yuan bonds was 3.65 percent in the first quarter, down 112 basis points from a year ago, he added.
In the first quarter, only a few developers issued bonds for mergers and acquisitions and although the amount is not large, it has a limited impact on the overall scale of bonds issued by the real estate sector, said the China Index Academy. .
The credit environment is deteriorating and many real estate companies still have high debt levels, said the Ke Institute, which is the research arm of China’s largest online real estate agent, Ke Holdings. It will take time for the government support policies to take effect.
Real estate companies are changing their business models and moving away from the high-leverage development model, the institute said. Companies that wish to become financially sound will reduce their debts, he added.
Mature companies are cautious and will hedge against credit and liquidity risks, so the amount of funding will slowly recover but is expected to remain low in the near term, the CRIC Research Center said.
Editor: Kim Taylor