China realty bubble bursts in bond markets
Wednesday, 2 June 2010
SINGAPORE, June 1 (Bloomberg): Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the US currency amid concern the nation's property market is overheating.
Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings, Country Garden Holdings and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data.
That's more than the 2.05 percentage point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.
Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending.
Goldman Sachs Group and Credit Suisse Group cut their profit estimates for Chinese real estate companies after a 12.8-per cent jump in real estate prices in April from a year earlier spurred the state to increase regulation.
"New issues by Chinese developers will stall for the time being," Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman, a fixed-income advisory and brokerage firm founded by two former Citigroup bankers, said in a phone interview. "Investors need handsome rewards for getting exposed to weaker fundamentals."
The amount of dollar bonds issued by China developers represents 45 per cent of all corporate dollar debt sales in Asia outside Japan this year, data show. The yield spread on $350 million of 13.5 per cent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings prices show.
Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website.
Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings, Country Garden Holdings and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data.
That's more than the 2.05 percentage point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.
Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending.
Goldman Sachs Group and Credit Suisse Group cut their profit estimates for Chinese real estate companies after a 12.8-per cent jump in real estate prices in April from a year earlier spurred the state to increase regulation.
"New issues by Chinese developers will stall for the time being," Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman, a fixed-income advisory and brokerage firm founded by two former Citigroup bankers, said in a phone interview. "Investors need handsome rewards for getting exposed to weaker fundamentals."
The amount of dollar bonds issued by China developers represents 45 per cent of all corporate dollar debt sales in Asia outside Japan this year, data show. The yield spread on $350 million of 13.5 per cent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings prices show.
Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website.