Expect more defaults from Chinese property developers: Loomis Sayles
[ad_1]
An analyst stated Tuesday that investors could be expecting more Chinese property developers defaulting on their bond payments. However, problems in China’s real estate industry haven’t spilled over into other sectors.
In the past few months, financial distress in Chinese real estate companies has been highlighted. EvergrandeDevelopers struggled to repay their debt. Evergrande seemed to have avoided a default. reportedly remitting funds for an interest paymentThis week.
Bo Zhuang (senior analyst, investment firm Loomis Sayles), said that it was most likely that there will be more defaults by these developers.Street Signs Asia”
According to the analyst, the Chinese authorities should gradually ease some policies that had weighed down real estate sectors and allow for an increase in bond defaults.
The fact that Chinese housing sales have not declined in the past two weeks is “a positive sign,” he said. He said that this has helped to make the valuations of developers more attractive for investors.
The future of China’s real estate sector
The Asian high yield bond market includes a significant portion that is owned and managed by Chinese property developers.
After years of borrowing excessively, these firms have seen rapid growth. Chinese authorities have intensified efforts to control the sector’s excesses, including limiting developer borrowing and tightening regulations for mortgage lending.
From a market standpoint, these Chinese high yield property names have been on a roller coaster. Zhuang stated that they are doing great if one looks at other Chinese non-property companies, such as those who have issued bonds.
He said that China’s banking industry has held strong despite the stress experienced by property companies. Analyst explained that banks issued bonds had seen no significant increase in yields and banking stocks have not suffered any major losses.
Zhuang said that the Chinese property market will change in five to ten years.
The analyst predicted that government will play an even greater role in controlling housing prices and assisting with development projects. According to the analyst, this will lead to the decline of the private sector’s market share and many developers going out of business or merging with others.
[ad_2]