Goldman Sachs: China Property Credit Still Under Pressure

Friday saw Goldman Sachs note that “China policymakers have stepped up easing efforts towards the property sector, but with weak household confidence, tight liquidity for developers and the COVID impact, there are no signs that the physical property market is rebounding. With the pickup in credit stresses, we previously raised our China Property HY default rate estimate to 31.6% for this year, from 19.0% previously. Note that 31.6% was our previous downside case. Increasingly property developers have utilized bond exchanges and maturity extensions when faced with onshore and offshore bond maturities. These delay the recognition of credit stresses, supporting our view that there is a long road ahead to restructure the sector. We believe investors should only be invested in the best quality developers, and should extend duration given the lower dollar prices of longer dated bonds.”