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Property Developers: Who's Still In?

CHINA
  • Last year, Beijing’s strict deleveraging targeting the housing development sectors combined with narrowing options for raising funds (due to the sharp contraction in liquidity) generated a sharp selloff in property developers (both equity and bond prices).
  • It first started with Evergrande, one of the most indebted property developers in the world, then gradually spreading to other major China developers.
  • With China home prices falling for 10 consecutive months, pressure on the developers’ market has remained intense.
  • In addition, the uncertainty over the economic outlook due to the strict zero-Covid policy has been weighing on growth expectations and domestic asset prices.
  • The chart below shows the bond prices for China major property developers maturing in 2024.
  • Interestingly, to the exception of Vanke 5.35% and Poly Real state 3.875%, which are currently trading slightly below par, all the rest of the property developers’ bonds have experienced significant selling pressure in the past year.
  • Fantasia, Shimao and Evergrande are all trading below 10, with Sunac 5.95% currently trading at around 11.

Source: Bloomberg/MNI

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  • Last year, Beijing’s strict deleveraging targeting the housing development sectors combined with narrowing options for raising funds (due to the sharp contraction in liquidity) generated a sharp selloff in property developers (both equity and bond prices).
  • It first started with Evergrande, one of the most indebted property developers in the world, then gradually spreading to other major China developers.
  • With China home prices falling for 10 consecutive months, pressure on the developers’ market has remained intense.
  • In addition, the uncertainty over the economic outlook due to the strict zero-Covid policy has been weighing on growth expectations and domestic asset prices.
  • The chart below shows the bond prices for China major property developers maturing in 2024.
  • Interestingly, to the exception of Vanke 5.35% and Poly Real state 3.875%, which are currently trading slightly below par, all the rest of the property developers’ bonds have experienced significant selling pressure in the past year.
  • Fantasia, Shimao and Evergrande are all trading below 10, with Sunac 5.95% currently trading at around 11.

Source: Bloomberg/MNI