Does Chinese developers turning to offshore bonds for financing signal recovery for the battered property sector?
- Some Chinese developers turned to offshore bonds last month, but investor appetite and the rate environment deter more issuers from following
- Bond issuance dropped 22.5 per cent year on year in the first five months, and near-term recovery for the sector remains unlikely, analysts say
A strong comeback for China’s property sector remains unlikely in the near term despite Chinese developers turning to the offshore market last month to raise more than US$300 million, according to analysts.
Nevertheless, the offshore market remains largely frozen. Offshore bond issuance dropped 22.5 per cent in the first five months compared to the same period last year, China Index Academy, which tracks developer financing, said in a June 9 report. Meanwhile data from the National Bureau of Statistics on Thursday showed that overall offshore financing for developers plunged 73.5 per cent during the same period.
“We see challenges with respect to developers regaining access to refinancing in both the onshore and offshore bond markets,” said HSBC credit analysts in a report this week, while attributing the rebound in bond prices to expectations of property loosening measures being put into place. “We also believe the offshore dollar high-yield-bond primary market will be shut to mainland China property high-yield developers in the second half this year.”
Expectations of rate cuts by China’s central bank and the weakness of the yuan currency are drawing issuers towards domestic sources of financing.
