Today’s Highlight: China’s Real Estate Bond Market Pointing To Rising Risk And A Slower Economic Growth In The 2H Of The Year
Bonds sold by China’s real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in US dollar given concerns over an overheating property market in China. Yields on the US$3.9bn of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to US Treasuries as of last week, according to data compiled by Bloomberg. Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combined recreational and commercial space. That was more than the 2.05 percentage points increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan, indicating that investors are demanding higher yields in view of rising risks of defaults. As a result, Glorious Property Holdings Ltd., which has 26 real estate projects in cities including Shanghai, Beijing, Harbin and Changchun, was forced to postpone its first sale of US dollar-denominated bonds in April. The amount of US dollar bonds sold by China developers represents 45% of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. China has introduced various measures to cool the property market, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third-home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes.
The World Economy... - 31/5/2010
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