Hong Kong, September 27, 2016 -- Moody's Investors Service says that home prices for China's (Aa3
negative) 70 major cities extended their rising trend in August 2016,
a development that could attract further regulatory tightening in some
second-tier cities.
"Robust price growth in Hangzhou, Xiamen, Wuhan,
Nanjing, Zhengzhou and Suzhou in the past 6-9 months triggered
regulatory tightening in their residential property markets in August
and September this year" says Franco Leung, a Moody's
Vice President - Senior Credit Officer.
"We expect more restrictive measures will be put in place if the
implemented measures do not effectively curb demand for property investments
or moderate property price growth in these cities," adds Leung.
Moody's conclusions were contained in the latest edition of its China
Property Focus newsletter.
According to the report, prices in Xiamen grew the most, at
44.3% in August year-on-year, followed
by Hefei and Nanjing at 40.5% and 38.8%,
respectively.
And for the eighth consecutive month, all four first-tier
cities posted double-digit year-on-year-price
growth. On average, Shanghai, Shenzhen, Beijing
and Guangzhou registered year-on-year growth of 30.5%
in August compared to 29.2% in July.
At the same time, the number of cities that registered home price
declines dropped further to 6 in August from 11 in July, and none
of the cities registered year-on-year declines of more than
5%.
The Moody's newsletter also comments on the 1H 2016 results of the
rated Chinese property developers, which -- although slightly
weakened from 2H 2015 -- signal overall stable metrics for the full
year 2016. The recovery in the developers' metrics will be
supported by reduced destocking pressure, higher completion rates
and lower funding costs. Healthy sales growth should also continue
in 2H 2016, but at a slower pace than in 1H 2016.
Meanwhile, Moody's liquidity index for Chinese property developers
remained unchanged at 24% in August 2016. In total,
12 developers -- mostly rated B2 or below -- demonstrated weak
liquidity.
The Moody's report further highlights the two negative rating actions
taken on Chinese property developers over the past month.
Of the 50 developers that Moody's rates in China, 20 (40%)
had negative rating outlooks or ratings on review for downgrade as of
26 September 2016. The negative bias was driven mainly by company
specific issues, including debt-funded growth or acquisitions,
major business transformations, liquidity and refinancing risks,
or weak operating models.
Articles featured in this month's edition of China Property Focus
include:
• Moody's-Rated Developers to Outperform the Market
Through the Rest of 2016
• Property Price Growth Accelerated in Second-Tier Cities
• First-Half 2016 Results Signal Stable Full-Year Metrics
• Liquidity Index Stabilized in August 2016
• Two Negative Rating Actions Between 26 August and 26 September
2016
Subscribers can read the full report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_192382.
The report may also be found through Moody's topic page "China's Trilemma:
Growth, Reform and Stability", available at http://www.moodys.com/chinarebalancing.
This page provides a centralized source for Moody's research related to
key credit issues in China as the country's macroeconomic story continues
to unfold.
Recent Moody's publications relating to China's Trilemma include:
Insurance -- China: 1H 2016 C-ROSS Solvency Ratios:
Life Insurers Show Decreasing Trend, While P&C and Reinsurers
Are Largely Unchanged
Regional and Local Governments -- China: Debt and Finances
Snapshot
Banks -- China: 1H 2016 Results: Negative Trends Persist
Amid Pockets of Improvement
China's Tighter Life Insurance Product Regulations Are Credit Positive
Rising Risks for Chinese Regional and Local Government SOEs as Policy
Evolves
Securitization -- China: Sector Update -- Q2 2016:
Auto ABS and RMBS Credit Quality Remains Firm, NPL Deals Emerge
Auto ABS -- China: Delinquencies Declined in Q2 2016,
but Will Rise Moderately on Economic Slowdown
Infrastructure and Project Finance -- China: Challenges and
Opportunities in Attracting Private Funding for China's Infrastructure
China's Intra-Governmental Fiscal Reform Will Reduce Regional
and Local Government Deficits
State-Owned Enterprises & Property -- China: Central
SOEs' Consolidation of Property Businesses Is Credit Positive
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This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Franco Leung
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Gary Lau
MD - Corporate Finance
Corporate Finance Group
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Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077