Business & Investment

Expect more defaults from Chinese real estate developers: Loomis Sayles

Investors may expect more Chinese real estate developers to neglect to pay bonds, analysts said Tuesday, but the real estate sector’s problems haven’t spread to other industries.

The financial difficulties of Chinese real estate companies have been at the forefront in recent months. Evergrande And other developers Had a hard time paying off their debt.. Evergrande then seemed to bypass the default Reportedly send funds to pay interest last week.

“The defaults for these developers are likely to increase,” said Bo Zhuang, senior analyst at investment firm Loomis Sayles.Street sign asia.. ”

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Analysts said the increase in bond defaults should be modest, with Chinese authorities slightly relaxing some of the policy measures that are putting pressure on the real estate sector.

He said home sales in China have stopped declining in the last two weeks, which is a “good sign.” As a result, he added that some developers’ ratings are “attractive” to investors.

The future of China’s real estate sector

Chinese real estate developers dominate the high yield bond market in Asia.

These companies have grown rapidly after years of over-borrowing. Chinese authorities are stepping up efforts to curb excesses in this sector, including limiting rampant borrowing between developers and tightening mortgage rules.

“From a market perspective, all of these high-yielding Chinese real estate names have passed this roller coaster, but looking at the other non-real estate names in China of the bond-issuing companies, they seem to be doing well. “The villa said.

In particular, China’s banking sector is holding up despite the stress among real estate companies, he added. Analysts explained that bonds issued by banks have “no significant changes” in yields, but bank stocks have not been hit hard.

According to Zhuang, China’s real estate sector is likely to look different in the next five to ten years.

He predicted that the government would play a greater role in the sector to manage home prices and development projects. This means that private sector market share will decline, many developers will go bankrupt or merge with other companies, analysts added.

Expect more defaults from Chinese real estate developers: Loomis Sayles Expect more defaults from Chinese real estate developers: Loomis Sayles

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