Help for NBFCs 08 Cambodian retail bond 09 India ECM shuts down 10
year will go ahead to test the
waters anyway but they need
to be prepared to lower their
valuation expectations,” said
another banker.
Logistics property developer
ESR CAYMAN, which pulled an
IPO of HK$9.76bn (US$1.24bn)
in June, is also considering
bringing back a smaller deal as
early as September. UK-based
data centre operator GLOBAL
SWITCH is looking to file a listing
application in September at the
earliest for a US$1bn float.
STAYING AWAY?
The unrest in Hong Kong has
also raised doubts whether
mainland Chinese issuers
would still want to list in the
city in the future.
An ECM banker said
Chinese issuers generally have
hesitations towards listings in
Hong Kong for the time being.
“Issuers tend to prefer either
the A-share market or the US
instead of Hong Kong, because
they are concerned the recent
disorder may further bring
uncertainties,” he said.
Some other bankers, however,
believe the impact is temporary.
“If you ask Chinese issuers at
this point of time, they may
tell you they don’t want to
list in Hong Kong. When the
protests end, they may give you
a different answer,” said another
ECM banker.
The disappointing
aftermarket performance of
Hong Kong IPOs is a bigger
concern for Chinese issuers
when they consider where to
list, said the second banker.
IPO performance in Hong
Kong has been mixed this
year. Chinese brokerage
Shenwan Hongyuan and
Chinese drugmaker Hansoh
Pharmaceutical, the only two
companies that raised more than
US$1bn in Hong Kong this year,
have seen their shares move in
different directions. Shares of
Shenwan Hongyuan fell 38%
since listing in April while that
of Hansoh Pharma surged 64%
since its June listing.
Developers face financing woes
Bonds Tighter regulatory oversight in China set to curb funding optionsBY YANFEI WANG, DANIEL STANTONChina’s property developers
are facing funding pressures
both onshore and offshore
as regulators tighten access
to financing to cool property
prices and tackle mounting
debt risks.
In the first three weeks
of August, developers issued
Rmb36.3bn (US$5.13bn) of
bonds onshore, down 18% from
Rmb44.1bn in the previous
month and a fall of about 7%
compared to the same period
last year, data from Wind Info
show.
The decline is a reversal of
the rapid expansion in the first
seven months of the year, and
comes after regulators began
limiting funding channels.
From January to July, Chinese
developers sold Rmb433.6bn
of bonds onshore and another
Rmb293.6bn offshore, a year-
on-year increase of 42% and
35%, respectively, according to
data from China Securities.
“Property companies have
been way too radical and had
to slow down their pace. Costswill not go down as more
funding sources are shutting
their doors to the property
sector. Priority will only be
given to refinancing,” said Yan
Yuejin, research director at
E-House China R&D Institute.
Starting from January, thegovernment banned non-
financial institutions from
lending to property companies
through trust loans.
The National Development
and Reform Commission in
July reined in offshore funding,
too, saying it would only
grant offshore bond quotas for
refinancing purposes.
Jiang Yuhui, an analyst
at China Securities, said he
expected property developers
to try different ways to raise
funds.
The onshore market is still
expected to contribute the
majority of funding, though a
very small group of companies
with offshore quotas may
continue to raise overseas
funds at higher costs. In the
first seven months of the year,
offshore funding costs were
8.48% on average for property
companies, compared to 5.70%
for corporate bonds issued
onshore, according to Jiang.
Most companies may need to
scale back expansion, improve
the efficiency of funding and
speed up housing sales, he
added.
Borrowers including
CIFI Group, Future Land
Development Holdings,
?China Railway Construction
Corporation, and R&F Group
are likely to face more scrutiny
of their financing plans,
according to two bankers with
separate securities companies,
citing their aggressive pace of
land acquisitions.
CIFI Group did not respond
to interview requests, while
Future Land, CRCC and R&F
declined to comment.
A person at the China
Securities Regulatory
Commission said that
regulators would take a
closer look at the bond
issuance plans of the above
mentioned companies by, for
instance, requesting moredocumentation on the use of
proceeds.
For CIFI Group, that means
the company now needs to wait
another two to three months to
get approvals from regulators,
according to a person familiar
with the company’s financing
plans.
CIFI has US$110m remaining
from its offshore bond quota,
but is unlikely to use it because
it would attract governmentscrutiny, he said, adding that
onshore corporate bonds and
private bonds are expected
to become a major source of
financing this year.
Some investors have
started to react to the rising
refinancing risks facing the
sector. A manager with the
asset management department
of a commercial bank in Beijing
said the bank began cutting
its exposure to bonds from the
property sector last week. For
example, it sold bonds issued
by Macrolink Culturaltainment,
citing its weakening financial
position.
“The financing channels of
the property sector have been
tightened, pointing to rising
possibilities of default,” she
said. “We are not expecting any
signs of improvement of the
financing capacity of property
developers this year.” For daily news stories
visit http://www.ifrasia.com“Property companies
have been way too
radical and had to slow
down their pace. Costs
will not go down as
more funding sources
are shutting their doors
to the property sector.
Priority will only be
given to refinancing.”“The financing
channels of the
property sector have
been tightened,
pointing to rising
possibilities of
default. We are not
expecting any signs
of improvement of the
financing capacity of
property developers
this year.”