China’s real estate bonds rise after six-year low

by BLOOMBERG

HONG KONGInvestors in junk dollar debt sold by Chinese property companies aren’t losing their cool.

Chinese real estate bonds actually eked out a small gain on Monday, a Bank of America Corp high-yield index shows. That compares to a 9.1% tumble on the day in the Bloomberg Intelligence index of shares of 22 Chinese developers, the biggest decline in six years.

After some of China’s biggest property stocks climbed as much as four or five times this year, bond analysts at Standard Chartered plc and CreditSights Inc aren’t surprised at the equity sell-off sparked by new property curbs in Chinese cities.

For bondholders, those curbs seem less of a concern. Chinese property companies moved to fund upcoming maturities earlier this year in buoyant markets and have sold US$35 billion (RM147.35 billion) of dollar notes in 2017, more than double the total for all of 2016. The companies have only US$11.4 billion of the bonds maturing to the end of 2018, and fixed-income investors have shown increased appetite for the notes, not less.

Yin Chin Cheong, a credit analyst at CreditSights in Singapore says, “Most of the developers have refinanced their callable/maturing bonds by now, hence, liquidity is expected to be adequate. Year-to-date contracted sales performance for the developers in general (ie those with US dollar bonds) have been good, and many are on track to meet their FY17 contracted sales targets (be it old or new targets). — Bloomberg