Real estate developers slammed after China reportedly tightens access to bond market funding

By Zheng / | June 7, 2019 12:04 PM SGT
Shares of Chinese real estate developers were under pressure on Monday after reports that regulators plan to restrict access to funding through the bond market, reflecting the latest move to cool a property market that has been heating up since early this year.
The bond financing halt, could be a blow to developers who count on the bond market as a major financing channel, aside from direct bank loans, shadow banking and offshore funding.
The 40 top property developers monitored by Shanghai based Tospur Consultancy raised 47.3 billion yuan (US$6.9 billion) through corporate bonds in April alone, accounting for 63 per cent of the total funding.
"The regulators will always tighten liquidity if the market gets heated or companies become more aggressive. So in this case I won't say we are very surprised about the rumour," said Adrian Cheng, a director with Fitch Ratings Asia Pacific Corporates.
He said the quantitative impact could not be measured as it is not clear how many developers are covered, and whether the restriction would also extend to offshore bonds.
Some Chinese developers that had been aggressive in land buying in past months will soon be temporarily blocked from accessing interbank and exchange-regulated bond markets, financial newspaper 21st Century Business Herald reported Saturday, citing officials. The National Association of Financial Market Institutional Investors, which regulates the interbank bond market, and the China Securities Regulatory Commission did not reply to emailed questions from the Post.
CIFI Holdings, a Hong Kong-listed developer ranked eighth nationwide in terms of land purchases in the first five months, is reportedly on the blacklist. Sunac China and China Railway Construction Corporation are also believed to be on the blacklist.
CIFI Holdings declined as much as 3.84 per cent in Hong Kong late Monday afternoon, while Sunac China fell 3 per cent. Evergrande, which didn't appear in the list, lost 2.9 per cent.
"CIFI's land bank is getting quite small, though their short-term debt maturity isn't that big. They only have about two years of land bank life and therefore they do have a bit more pressure to buy land and...