Bangkok--13 Aug--Moody
Moody's Investors Service says the rebound in China's property market in the first half of 2009 is unlikely to result in improvement in its ratings for Chinese developers.
A recently published comment by Moody's notes that the developers have had a positive first half off the back of a strong turnaround in the property market and improving access to funding. However, the agency notes that there is considerable uncertainty as to the duration and strength of such a recovery given the high regulatory and operating uncertainties in China.
In addition, Kaven Tsang, the report's lead author and a Moody's analyst, adds, "Some of our issuers still have weakened balance sheets and liquidity positions, while a few small developers and others have obligations related to upcoming large land payments and short-term, offshore debt."
Tsang adds, "We are also cautious about the strategies of many developers in managing their balance sheets because they have previously shown a willingness to extend their balance sheet with debt when acquiring land during 2007 and early 2008 just before the property market turned."
In commenting on a recent sharp drop in Chinese banks' lending for July, Tsang notes, " The numbers confirm our expectations of a slowdown for the year's second half. Although draconian governmental measures to tighten credit are unlikely, we question the sustainability of the strong rebound in the Chinese property market, which depends on the central government's continuation of a relatively relaxed lending policy."
Peter Choy, a Moody's senior credit officer and co-author of the published comment, says, "Some cash-strapped developers have taken advantage of the fist half's recovery in the property market to issue convertible bonds and equity or sell assets, which will help restore developers' balance-sheet liquidity." However, Choy warns, "These improved financial profiles may again deteriorate if some issuers rush to replenish their land holdings, so financial discipline remains a key rating consideration."
The recently published report, entitled, "China's Property Developers:
Operating environment and strategies remain uncertain over the near term," is available at www.moodys.com.
Asst Vice President - Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077