RTTNews - Moody's Investors Service in a report on Thursday said a rebound in China's property markets in the first of the this year is unlikely to result in improvements in its ratings for Chinese developers.
The Moody's report said the developers had a positive half on the back of a strong turnaround in the property market and improved access to funding. However, the agency said there is considerable uncertainty as to the duration and strength of such a recovery given the high regulatory and operating uncertainties in China.
The firm noted that while some issuers had problems regarding weak balance sheets and liquidity positions, others had obligations relating to upcoming large payments and short-term offshore debt.
Kaven Tsang, main author of the report said, We are also cautious about the strategies of many developers in managing their balance sheets because they have previously shown a willingness to extend their balance sheet with debt when acquiring land during 2007 and early 2008 just before the property market turned.
Further, Peter Choy senior credit officer and co-author of the report noted, Some cash-strapped developers have taken advantage of the fist half's recovery in the property market to issue convertible bonds and equity or sell assets, which will help restore developers' balance-sheet liquidity.
At the same time Choy said, These improved financial profiles may again deteriorate if some issuers rush to replenish their land holdings, so financial discipline remains a key rating consideration.
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