Hong Kong, August 29, 2016 -- Moody's Investors Service says that the sales of Moody's-rated
developers will continue to outperform the broader industry for the rest
of the year.
"Cumulative contracted sales for the 20 rated developers that we
track grew 62.1% year-on-year in January-July
2016 to around RMB1.2 trillion, outpacing the 41.2%
increase in national sales over the same period," says Cindy
Yang, a Moody's Analyst.
"We expect their strong execution, reputable brands,
and solid financial and liquidity profiles will strongly position them
to benefit from the industry's ongoing consolidation,"
adds Yang.
Moody's conclusions were contained in the latest edition of its China
Property Focus newsletter.
According to the report, property price growth in first-tier
cities -- while still strong -- moderated to 29.2%
in July from 30.7% in June on a year-on-year
basis.
Moody's expects further policy tightening in cities with strong
price growth -- such as the measures announced for Nanjing and Suzhou
in August, while in lower-tier cities with high inventory
levels, policies will remain supportive for developers to clear
inventory.
The Moody's newsletter also comments on Kaisa Group Holdings Ltd's
(unrated) debt restructuring, which it says provides several lessons
for the bondholders of other Chinese property developers.
Specifically, Moody's believes the developers' high
asset values provide incentives for owners and shareholders to keep companies
as going concerns, and to pursue debt restructuring rather than
liquidation in the event of default.
Meanwhile, Moody's liquidity index for Chinese property developers
improved slightly to 24% in July 2016. In total, 12
developers -- mostly rated B2 or below -- demonstrated weak
liquidity. The improvement was due to one developer's strengthened
liquidity following its disposal of various assets.
The Moody's report further highlights the four rating actions taken
on Chinese property developers over the past month: two positive
actions and two negative actions.
Of the 50 developers that Moody's rates in China, 20 (40%)
had negative rating outlooks as of 25 August 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 Moderating with Selective Regulatory Tightening
• Kaisa's Restructuring Offers Lessons for Bondholders
• Liquidity Index Improved Slightly in July 2016
• Four Rating Actions Between 27 July and 25 August 2016
Subscribers can read the full report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_191832
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:
• Regional and Local Government (RLG)-Related Issuers --
China: Moody's Support Assumptions for Entities Owned by Chinese
RLGs
• Regional and Local Governments -- China: Key Factors
Shaping Standalone Credit Strength
• Measures to Cool Rising Property Prices in Nanjing and Suzhou,
China, Are Credit Negative for Developers
• High-Yield Non-Financial Companies -- China:
Most Rated Companies Can Manage Foreign Currency Debt Exposure
• China Credit Market: Wuhan Guoyu's Liquidity Crunch
Tests Investor Protection in China
• Chinese Proposal to Regulate Banks' Wealth-Management
Products Is Credit Positive
• China Credit: Spillover from Potential Dislocation in Onshore
Bond Market Would Be Limited
• China Ports: Slower Economic Growth Is Challenging the Sector
• China City Construction's Default Will Impede Offshore Issuance
• RMBS -- China: Answers to Frequently Asked Questions
About Housing Provident Fund RMBS
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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.
Kaven Tsang
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
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Gary Lau
MD - Corporate Finance
Corporate Finance Group
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