Easing of yuan bonds not much help: Fitch

Easing of yuan bonds not much help: Fitch

 

(BEIJING) Most of China’s cash-thirsty property developers are unlikely to benefit from the easing of a regulatory logjam on domestic bond issuance, Fitch Ratings said yesterday.

 

The China Securities Regulatory Commission (CSRC) has overseen the corporate bond market since last August, but it did not start until March to authorise developers to issue debt.

 

Four developers have since been allowed to issue a total of 12.8 billion yuan (S$2.5 billion) in corporate bonds, and a few more are likely to get the green light in the coming months, Fitch said.

 

Only nine corporate bonds in total have been issued and are trading on the Shanghai and Shenzhen stock exchanges since the CSRC took over regulatory responsibility for the market.

 

That is partly because the banking regulator has barred banks from guaranteeing new bond issues.

 

This in turn means insurance companies, the main source of demand, may not buy them.

 

The People’s Bank of China, frustrated by the regulatory deadlock, in April extended the maturity of issues on the commercial paper market, which it supervises, to as long as five years.

 

Fitch said the CSRC’s approval would give the four developers a new channel to raise cash, but it would not have an immediate impact on the credit profiles of Chinese real estate firms, especially those listed overseas.

 

The bond market is accessible only to domestically listed firms.

 

The four companies are Poly Real Estate Co, Vanke Co, Gemdale Corp and Xinhua Zhongbao Co.

 

The rating agency said bond financing would be available only to a few leading locally listed developers due to limits on market capacity and investors’ appetite.

 

‘It is not opening the door wide, but just a chink,’ said Matthew Kong, an associate director in Fitch’s Asia Pacific corporate team.

 

All four developers said they would use part of the bond proceeds to replace bank borrowings.

 

Chinese developers have relied heavily on bank loans to expand aggressively.

 

However, that strategy has become tougher since the government tightened credit late last year in an effort to curb inflation. — Reuters

 

Source: Business Times

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